(Reuters) - Square Inc <SQ.N>, the mobile payments company co-founded and run by Twitter Inc <TWTR.N> Chief Executive Jack Dorsey, reported a higher-than-expected jump in quarterly revenue as it processed more transactions.

The company also raised its full-year revenue forecast, sending its shares up as much as 6.8 percent in after-hours trading on Tuesday.

Square said the total value of payments it processed in the third quarter jumped 39 percent to $13.2 billion as it continued to attract larger merchants to its platform.

Analysts had expected payment volumes of $12.47 billion, according to market research firm FactSet StreetAccount.

Larger retailers represented 43 percent of Square's total payments in the latest quarter, slightly higher than the 42 percent in the previous quarter, highlighting the company's continued shift from its traditional user base of pop-up shops and food trucks.

Square, which went public in November last year, facilitates payments between businesses and customers by using a credit card reader that turns any mobile phone into a payment terminal.

The company also offers services for businesses such as point-of-sale registers, invoice software and loans.

Chief Financial Officer Sarah Friar said on a conference call that revenue growth was helped by "momentum" in Square Capital - the company's lending program - and newer products such as Instant Deposits.

Square Capital processed $208 million in loans in the quarter, 70 percent more than in the year-earlier quarter, despite the rise in regulatory scrutiny into online lending practices.

Total net revenue rose to $439.0 million from $332.2 million. (http://bit.ly/2feGagk)

The company said it received $7 million in transaction revenue from Starbucks Corp <SBUX.O> in the quarter as the coffee chain moves off the company's payment network.

Square said it expected only a "nominal" contribution to revenue and transaction profit from Starbucks in the current quarter.

Net loss attributable to common stockholders narrowed to $32.3 million, or 9 cents per share, from $53.9 million, or 35 cents per share.

Analysts on average had expected a loss of 11 cents, according to Thomson Reuters I/B/E/S.

The company lifted its full-year revenue forecast to a range of $1.695 billion to $1.70 billion from its prior range of $1.63 billion to $1.67 billion.

Analysts on average were expecting revenue of $1.68 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Narottam Medhora in Bengaluru; Editing by Savio D'Souza and Saumyadeb Chakrabarty)