A Wall Street firm has said that Square Inc (NYSE:SQ) is capable of adding millions of dollars in annual revenue if it supports bitcoin. Last week the fintech firm indicated that it was conducting tests with a view to supporting bitcoin on its Cash application.
“While we are positive on Square’s strategy, to the extent it confers legitimacy on Bitcoin … We estimate that if Square can accumulate 10m bitcoin buyers over two years, this could drive an incremental $30m in revenue,” wrote Paul Condra, an analyst at Credit Suisse, in a client note.
According to Condra Square could impose a 1.5% fee on every transaction and this could see an average customer spending approximately $200 on an annual basis buying bitcoins.
Per Square which was founded by the chief executive officer of Twitter, Jack Dorsey, the feature that allows users to engage in the buying and selling of bitcoins was added arising out of demand. Currently it is only being offered to a few users and the full rollout would see Square competing with such cryptocurrency exchanges as Gemini and Coinbase.
After the announcement some speculated that Square threatened the existence of current bitcoin trading platforms. Coinbase already offers a service through which users can buy bitcoin in an instant using their debit cards. The service was introduced last year in August and there is a 3.99% fee charged. If Square goes ahead to charged a 1.5% fee it could pose a competitive threat to Coinbase.
One advantage that Square has compared to other bitcoin trading platforms is a highly recognizable brand name that has also earned trust. Coinbase has also introduced initiatives aimed at engendering trust in its brand. Currently Coinbase stores digital assets worth $9 billion and the firm recently introduced a security platform aimed at wooing money from hedge funds.
According to Condra another firm that has the capacity to provide bitcoin services is PayPal. The main stumbling block though is the regulatory environment as it poses a big risk for established companies.
On Monday shares of Square Inc edged up by 2.33% to close the day at $45.21 a share.