It’s been a lackluster year so far for digital- payment firm Square (NYSE:SQ), whose share price plummeted with the overall market at the end of 2018 and has yet to recover all of its losses.

SQ stock is still trading 30% below its 52-week high, despite appreciating by more than 27% over the past six months. Meanwhile, rival firms like PayPal (NASDAQ:PYPL) are trading at all-time highs as investors cheer their advancements in the payment processing space. Is Square stock bound to catch up or is the company’s buzz starting to fizzle out?

SQ stock has had a less-than-impressive year so far, but the same isn’t true for the company behind the ticker. Square itself has been putting projects into motion that are likely to boost the firm’s growth trajectory far into the future, lifting Square stock. 

Cash App

While Square’s efforts to become a payment processing titan are certainly worth considering, it’s the firm’s entry into the banking space that I find most intriguing. Square recently rolled out Cash App, which will compete directly with PayPal’s Venmo service. Cash App is a huge step toward the future, or lack thereof, of the banking industry.

For years, analysts have been talking about fintech (technology for the tech sector) dramatically changing the way banks operate, first with cryptocurrencies and now with person-to-person payments. So far, that disruption has been minor, but I’d wager that the banks’ doomsday is coming.

You need only look at China, where mobile payments using digital ecosystems have become the norm, to see the storm brewing. The merchant fees that credit cards take and the cumbersome mobile-payment options that banks offer have created an opening for mobile-payment processors, and Square is pouncing on that opportunity.

Square’s Cash App is still in the early stages, but so far it has a lot of promise. Users can pay through Cash App anywhere that Visa is accepted, and SQ has set up a loyalty program to encourage people to start using the service. Dubbed “Boost,” the loyalty program offers discounts of 10% or more at a variety of coffee shops and restaurants. While SQ will have to devote funds to running the program, it’s likely to pay off by driving engagement, boosting Square’s revenue and SQ stock.

Square’s Ecosystem Is Positive for Square Stock

Meanwhile SQ has been hard at work on creating an ecosystem that its customers will become tied into. As fellow InvestorPlace contributor Will Healy pointed out, ecosystems are important  for companies that want to become a top dog in their industries. All of the big dogs in the tech space got there by creating an ecosystem that customers want to become a part of, and don’t want to leave. 

Apple Inc. (NASDAQ:AAPL) is a great example of this; despite a few rough years in which many criticized Apple’s latest updates, customers remained loyal to it because the hassle of changing over to a new ecosystem was too high of a switching cost. 

Square is doing the same thing within the payment processing space. The firm began simply as a credit card processor, but has since added on services like a payroll arm as well as a financing option that customers can use to take out loans. SQ also recently added on a new feature that allows clients to manage delivery orders through its platform. 

Plus, Square has the potential to grow geographically. The firm is only operating in five countries at present, which is a relatively small footprint compared to competitors like PayPal, whose services are all around the world. With so much untapped potential around the globe, Square has a lot of possible growth on the horizon as it penetrates new international markets. 

The Cash App Is the Future

SQ stock looks poised to outperform over the next few years as its growth strategy starts to pay off.  Those who buy SQ stock and hold it for the long-term will benefit from the growth that will be driven by Cash App. The program looks likely to expand exponentially  as its loyalty discount entices users to spend using the app. If individual payments start to take the place of traditional banking, SQ stock has a good chance of becoming a long-term winner for investors who jump in now.

As of this writing, Laura Hoy was long AAPL.