The young upstart mobile payments company Square is surging ahead. Square made the surprising announcement this week that the San Francisco-based startup launched in 2009 by Twitter founder Jack Dorsey is now processing about $4 million in mobile payments per day, which is $1 million more than it processed just one month ago. And the company is on target to double its current processing volume by October.
What is Square’s Formula for Success?
How did the fledgling firm, coming late to the already-crowded mobile payments arena make such a dent in the market so quickly? Cash helps. With a recent funding infusion of $100 million and an additional undisclosed financial investment from Visa, Square now boasts a valuation of $1 billion. Talent and expertise helps too. Jack Dorsey is responsible for developing the ubiquitous micro-blogging platform that changed how the world communicates. Angel investor and Square COO Keith Rabois is no slouch either. Rabios has an impressive resume, including former executive stints at LinkedIn, PayPal and Slide. But plenty of startups with money and talent to spare have failed to live up to their potential. Remember Segway’s ambitious plans to replace automobiles?
Small Business Point of Sale Niche Market
Square smartly identified a niche market that had needs that were unmet and went after it with a laser-like focus. Unlike its mobile payments competitors, PayPal and Google Wallet, Square targets the real-world transactions of individuals and small business owners. Millions of small businesses don’t accept credit cards due to merchant account hassles, hefty transactions fees and high monthly fees. The Square system uses a free, simple mobile phone app designed for iPhone, iPod, iPad and Android devices, together with a physical card reader that conveniently plugs into the headset/microphone jack. As soon as a user signs up for the service, he or she can start accepting credit cards using their mobile devices immediately by inputting the credit card numbers manually. The card reader is mailed out within a few days or the user has the option of picking up a reader at an Apple retail store. Square’s service accepts MasterCard, American Express, Discover and Visa transactions in the United States.
Anyone Can Accept Credit Card Payments Now
Individuals can plug the reader into their smartphones and take credit card payments for any number of everyday transactions, such as splitting a lunch bill or selling items at a yard sale. Small businesses can easily set up an iPad device as a mobile point of sale terminal. Users pay just a 2.75 percent transaction fee and payments are deposited daily into a user’s bank account. We are well on our way to a cashless society. And with the trend in virtual wallets using our smartphones and Near Field Communication technology, soon we will pay for goods and services with a wave or a bump of our phones.
Visa Partnership Quieted VeriFone’s Security Allegations
The emerging mobile payments technology is in its infancy and users still need some convincing that the technology is secure and will not subject them to identity theft or fraud. VeriFone, a competitor that makes point of sale credit card readers that has teamed up with Google Wallet, took aim at Square several months ago, accusing the emerging startup of putting customers at risk with a serious security flaw in its mobile phone reader. Square fought back, denying VeriFone’s security claims and promptly secured a valuable partnership with Visa that soon quieted VeriFone’s strategic volleys. Visa’s involvement was a brilliant move by Square: If its reader is good enough for Visa’s customers then it must be secure.
Money, talent, friends in high places and the targeting of a niche market ripe for growth – Square is certainly a startup on the move.
Well, one more direction
to break the defense of cash. Mobile, Internet technologies are changing anything so cardinally. I remember the time when perceived Credit card as something strange, stared at ATMs as a gimmick. And now, evidently, it’s time to order a frame for the good old paper dollar to keep for posterity.
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