By Heather Somerville and Sweta Singh

(Reuters) - Mobile payments company Square Inc on Wednesday reported a 41.5 percent jump in revenue and diminishing losses as more large merchants make sales using Square's technology, a sign the company has moved beyond serving only pop-up shops and food trucks.

"We are finally at a place where our tools scale to any size of seller," Chief Executive Jack Dorsey, who is also the CEO of Twitter Inc, said on a call with investors. "We are seeing more and more appetite from the larger sellers" as well as chain retailers with multiple locations.

Square stock was up more than 14 percent to about $12 in after-hours trading following the second-quarter earnings call. The price at closing bell was $10.44.

Square's revenue reached $438.5 million, up 41.5 percent from its earnings of $310.0 million a year earlier. It processed $12.5 billion in payments, up 42 percent from a year ago, mostly due to new and larger retailers using Square, the company said.

About 42 percent of total payments is coming from larger retailers, signaling a dramatic transition for Square. The company started seven years ago as a card reader that turns a mobile phone into a payment terminal, and was sold primarily to pop-up stores, coffee shops, food trucks and other small merchants that couldn't afford elaborate payment systems.

Square, which went public in November, has expanded to offer an array of services for businesses such as point-of-sale registers, invoice software and loans.

Square Capital, the loan program, saw a 123 percent increase over last year, with $189 million in loans made to businesses. Square added five investors to the program, which will provide capital for additional borrowers, said Sarah Friar, Square chief financial officer. About 90 percent of borrowers renew their loans.

The growth in Square's loan business comes despite increased scrutiny over lending practices fueled by troubles at online lending platforms LendingClub and Prosper Marketplace.

"There was definitely some swirls around the alternative lending market," Friar said on a call with journalists.

Friar said Square's familiarity with borrowers - the company lends to merchants it has already done business with - and the low cost of the program distinguishes it from other lenders.

"We have millions of sellers on our platform," she said. "So our customer acquisition cost is effectively zero."

Square recoups its loans by taking a slice of each sale the merchant makes; default rates are around 4 percent, Friar said.

For 2016, Square expects total revenue to be in the range of $1.63 billion to $1.67 billion.

Still, the company is not profitable. Its losses narrowed to $27.3 million from $29.6 million during the same period last year. On a per share basis, Square lost 8 cents. [nBw3msGH3a]

The company is looking to grow overseas, and is eyeing the United Kingdom as a potential next stop, executives said Wednesday. Square currently serves United States, Canada, Japan and Australia.

Reuters reported last month that Square incorporated a business called Squareup Europe Ltd in Britain, lining itself up for what could be its first foray into Europe.

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(Reporting by Heather Somerville in San Francisco and Sweta Singh in Bengaluru; Editing by Sriraj Kalluvila and James Dalgleish)