Right now everyone loves Square (NASDAQ:SQ) stock.

The company only came public in 2015, at a market cap of $2.9 billion. Today that number is right around $124 billion.

At its current value Square is the third most valuable payment outfit, behind only MasterCard (NYSE:MA) and Visa (NYSE:V). But it wants to be a lot more than a payment processor. It wants to be a bank.

Analyst Brian Sozzi believes it can do just that. He recently compared it to buying JPMorgan Chase (NYSE:JPM) in 1871.

That may sound optimistic, but Square’s track record justifies it. Its latest brilliant move, announced alongside record second-quarter earnings, was to buy AfterPay (OTCMKTS:AFTBY), an Australian Buy Now Pay Later (BNPL) outfit, for $29 billion.

AfterPay and SQ Stock

No deal has roiled the payments business so much as Afterpay. SQ stock jumped 7% on the news, while shares in MasterCard and Visa are both down by 6%.

Analysts believe that in addition to making Square a leader in the BNPL space, AfterPay offers international exposure, huge new customer opportunities on both sides of payment transactions.

Square plans to combine AfterPay with its Cash app and its merchant acquirer system to build a mobile banking system on both sides of a transaction. That’s why it launched business “bank” accounts, one week before the AfterPay deal.

The company paid a premium for AfterPay, but it has already gotten much of the purchase price back from investors.

But wait, you ask. Aren’t credit cards already BNPL vehicles? Yes, they are, but with credit cards you pay interest. With BNPL you don’t. With credit cards the risk is with the bank. With BNPL it’s with the merchant.

Visa can copy the technology. It’s doing just that alongside a British payment software house called i2c. Visa will advertise its plan as “Visa Installments” and processors will plug into it through Application Program Interfaces (APIs).

Square’s bet is that it can control both sides of the BNPL transaction, the customer and store, bypassing not just the processor but the bank. Deals like this reportedly have JPM CEO Jamie Dimon shaking in his shoes. 

The Big Risks

There are big risks, however. What happens when BNPL clients don’t pay? It’s the store that made the loan, backed by what is now used collateral. Credit risk could blow up the whole business at the first economic downturn.

There’s another big risk in SQ stock: Bitcoin. CEO Jack Dorsey, who also runs Twitter (NASDAQ:TWTR), is a big Bitcoin fan. He’s getting into mining Bitcoin, with his own money. Square also took a $45 million impairment charge on its Bitcoin holdings in the second quarter.

For now, everyone is ignoring these risks. Of 24 analysts following Square at Tipranks, 19 are screaming buy. By comparison JPMorgan Chase is only a moderate buy, with a total of 13 analysts and one saying sell it.

The Bottom Line

Jack Dorsey could be the greatest banker since J.P. Morgan himself. He also could be Charles Ponzi.

Dorsey is taking huge risks at Square, with analysts and investors all-in on the ride. Maybe AfterPay will transform lending, but merchants aren’t going to be so excited when they’re suffering losses.

Maybe Bitcoin is the greatest thing since sliced bread. Maybe it’s a token based on an encryption algorithm whose value will disappear once there’s something real to invest in.

When everyone is screaming that I should sell something, that’s when I buy. When everyone is screaming at me to buy something, that’s when I consider selling. Right now, everyone is screaming I should buy SQ stock. I’ll wait until the risks are in.

On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.