Here’s Why Square May Edge Out PayPal and Help Apple

Mobile payment processing is looking increasingly profitable for Square. The company announced today that it is handling $8 billion in transactions every year. This is good news for companies like Starbucks (NASDAQ:SBUX) who have invested in Square, and use it for hands-free latte sales in a number of its stores already. Now that Square is valued at $3.2 billion, twice what it was just a year ago, COO Keith Rabois has made a bold prediction.

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“The era of standalone machines is over,” he said. “Everyone will be migrating to iPads and comparable devices, which will be powered by an app – that is, hopefully, Square.” Rabois sees a future where cash registers are relics. Traditional point-of-sale equipment companies like Verifone (NYSE:PAY) lose out in this future. On the other hand, Apple (NASDAQ:AAPL) and other mobile device and tablet manufacturers stand to benefit as companies replace registers.

Verifone’s future seems to be the subject of speculation among analysts. The company received price target cuts in September from UBS (NYSE:UBS) and SunTrust (NYSE:STI), though the targets are still above current market value. The UBS price target is $39, SunTrust is at $45, while Verifone is trading around $31.64. The Street Ratings upgraded the stock from “hold” to “buy.” Revenue seems to be growing despite the shares seeing a drop of just over 11 percent this year to date.

Robois, by the way, is a former executive at PayPal (NASDAQ:EBAY), which is one of Square’s major competitors. PayPal is the most ubiquitous online payment processing service, claiming more than 50 million active customers. The company has partnered with retailers such as Home Depot (NYSE:HD), Barnes & Noble (NYSE:BKS), and Office Depot (NYSE:ODP).

Square has enough momentum behind it to legitimately threaten PayPal and reshape how people pay for goods. The landscape is rapidly evolving, and it’s clear that the payment industry is going to turn on its head as mobile processing grows.

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