Platform Spotlight: Square

There are several formidable players vying for the mobile money space.  I’ll be examining these players every Monday.  Last week, we started by looking at Fundamo; this week, we take a look at Square, a much-hyped mobile-based credit card processing platform focused on the US.

Overview: Square is perhaps most famous for being founded by Jack Dorsey, also the founder of Twitter.  But Square’s momentum and success is noteworthy on its own.  Square was perhaps the first solution that made use of the iPhone’s headphone jack to swipe and charge a credit card; it also enabled people without merchant accounts to accept credit card payments.  Since those two innovations, Square has been on a roll and now processes over $3 million in transactions per day.  It’s a private company based in San Francisco, has about 100 employees and recently raised funding at a reported $1 billion valuation.

Square enables everyone with a smartphone to take credit card payments.  While in principle this could include every person selling something on Craigslist, its sweet spot is small businesses.  Small businesses have a sizeable amount of transactions but paying for a traditional POS device and managing a full-fledged merchant account are often beyond their reach.  With Square, there’s no need to bother with either a POS device or a merchant account.

Key Features:

  • Universal credit card acceptance: Square accepts Visa, MasterCard, American Express, and Discover.  Credit card information can either be entered by swiping the card through the Square dongle or by manual entry (a “card not-present” transaction).
  • Inventory tracking: Square’s recently launched “Square register” app for the iPad enables merchants to enter inventory information.  This makes transaction information easier to enter and gives the merchant great insights into their business.
  • Consumer application: Square’s recently launched “Square card case” app enables consumers to establish a link with a particular merchant that stores their payment method for quicker paying as well as keeping an electronic version of their receipts.
  • Secure payment processing: Square has Level 1 PCI-DSS compliance.

Notable Clients/Partnerships: Square’s highest profile partner and investor has been Visa[1].  In April, 2011 Square announced that Visa had made a strategic investment and that the two companies would be collaborating to improve the Square experience, especially for Visa cards.

While some may think Visa and Square are competitors in the mobile payments space, the investment/partnership makes a lot of sense for both parties.  For Square, Visa brings credibility; for Visa, Square is building and pushing a solution that enables more people to use Visa cards.

Competitors: Long term, Square’s competition is principally makers of POS devices.  VeriFone, who has partnered with Google to push NFC, and Ingenico are two of the biggest.  Intuit and Rev also make a smartphone-enabled credit card reader.  As a maker of the popular accounting software Quickbooks, Intuit can offer merchants an integrated solution to manage their business while Rev is focused solely on the mobile payments space.

Future: In the short to medium term, Square has a big market for continued growth – COO Keith Rabois estimates that there are 27 million small businesses that cannot accept credit card payments[2] and in developed countries like the US and Western Europe, credit cards and debit cards will remain the dominant form of payment for some time.

As credit card payments shift to mobile-based payments, Square will need to offer technology to support NFC.  How it fits in with Google’s Wallet and competing NFC-based wallets remain to be seen.  Also, from an emerging market perspective, Square’s reliance on smartphones for its customer-side mobile application is limiting for the next 3-5 years.  Finally, moving beyond small merchants to larger merchants will require Square to introduce a POS-like device beyond the iPad.

Long term, Square has a chance to build a merchant solution that eases the transition from credit cards to mobile payments.  If it succeeds in doing so, it will earn a valuable slice of the transaction pie.

[1] The very same Visa that just purchased Fundamo.  Visa is getting very active in this space.

[2] Rabois mentioned this in an interview although I am guessing he got the data from another source.  More here:



Filed under Platform, Square

2 responses to “Platform Spotlight: Square

  1. Nice blog! Interesting read…

  2. Pingback: Platform Spotlight: Obopay | Mobile Money Exchange

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