Mobile Payment Startup Square Growing Strong And Transforming Small Business

Square is getting more users thanks to inexpensive hardware, availability at 20,000 retailers, and an easy to use interface.

Some ideas are just too good to be true, and accepting credit card payments with a mobile device is one of them. Square, the mobile payment startup conceived by Twitter co-founder Jack Dorsey, quickly became the poster child of smartphone-enabled technology in its first year of operation. Now, the company has continued its growth, launched new services and racked up some big numbers in a very short time: 2 million users, an annualized rate of over $6 billion in transactions, and a $4 billion valuation…all in just 2 years and despite an increasing number of competitors jumping into the game.

The company launched in May 2010 and by August 2011, Square reported that its smartphone dongle reached the important million-user milestone and the company was processing $4 million per day with a flat transaction rate of 2.75 percent. In the last month, the company announced reaching 2 million users and processing $6 billion a year, which translates into over $16 million a day. Doubling its number of users in that time frame is impressive, but quadrupling the amount of transactions is the stuff of breakaway success.

It’s no wonder that the company grew from 80 employees last year to 300 today and has initiated another funding round to add to its $141 million in order to go international later this year and market its services heavily. With this kind of growth, the possibility that Square will be acquired is looming on the horizon, although its multibillion dollar valuation could cause interested parties to hesitate in light of the debacle surrounding Facebook’s IPO.

Considering that Cisco recently projected that more than 10 billion mobile devices will be connecting to the web worldwide by 2016 (that’s 1.4 devices per person), Square has enormous potential to become the go-to service for monetary transactions anywhere, anytime. The global mobile payment market was recently projected to grow to close to $1 trillion by 2016 as well.

The card reader is given away for free on its website when users sign up, but to attract more customers, Square initially sold the dongle in Apple stores for $9.95 (with a $10 rebate upon signup for new users). It didn’t take long for other retailers, like Walmart, Target, and Best Buy, to carry the product. Recently, Square announced that it has expanded into more than 20,000 retail locations across the US, becoming available at Walgreens, Staples, and FedEx Office stores.

It’s interesting to see where Square is being adopted, both in specific industries and geographical adoption. TechCrunch reported that Square is being used heavily at art fairs and farmers’ markets, citing over 90 percent use at the recent Etsy’s New York’s Spring Handmade Cavalcade. It is even being used in New York taxis. As far as where the service is most popular across the US, a one hour snapshot of Square transactions across the country shows heavy use along the commerce-dense Eastern seaboard:

Although the company has been satisfied with its card reader, it has continued to find ways to innovate credit card transactions. Last year, it introduced Card Case, an app which allows customers to store their credit card information with Square merchants they frequent, so they only have to provide their name to make a payment. The app was recently rebranded as Pay with Square. Earlier this year came the launch of Square Register, an iPad app that aims to replace point-of-sale registers, especially for small businesses. When used together, these two services mean physical credit cards are not necessary.

But Square has even more up its sleeve to reduce items you’d carry around in your wallet. It now provides a way for businesses to offer customer loyalty card programs electronically (a round of applause for the end of frayed punchcards that need only one more punch). The digital cards will allow merchants to create rewards and customers to track their progress toward each discount. Additionally, the software provides merchants with sales analytics, enabling merchants to identify key hours when sales peak, as well as ways to track inventory.

Yet, Square by no means has a corner on the mobile payment market. Since its breakaway success, it is nearly impossible to keep up with the number of credit card readers that are now available, which include PayPal, SalesVuIntuit’s GoPaymentiZettle (dubbed the ‘Square of Europe’), China-focused 99BillROAMpay, or Payware Mobile. Trying to compare the pros and cons of these services is getting trickier and that’s the reason that Square’s free reader, simple flat rate, and investment into its app ecosystem makes it the frontrunner.

However, all of this growth can have its downsides, and frustrated commenters sprinkled across the web have made it clear that Square needs to work on its customer relations. Two gripes seem to rise above the rest: the inability to get a customer service agent on the phone and funds being placed inexplicably on hold, which Square justifies as part of its verification when the risk factors for the buyer, merchant, or both is higher than normal.

Square has done it’s best to answer user questions in its extensive Help Center, but it also acts as a smoke screen to the hard-to-find customer service email page . Users have also complained about discovering that the company doesn’t have a toll-free phone number, and that the only number provided is the company’s main line at (415) 375-3176. In an era when the Internet acts as a megaphone to customer relation problems, you’d think that Square would be going the extra mile with these concerns. The number of problems users are actually facing is unknown, but one measure is the Better Business Bureau’s rating and record on Square, which is currently an A-. While the page shows only 148 complaints with many “resolved” by Square pointing users back to its Terms Of Service agreement, most disparaged users are likely to vent on the web than to the BBB, perhaps making that A- rating significantly higher than the reality.

Yet, with popularity comes growing pains, and hopefully part of the startup’s fundraising plans involve bulking up its customer service along with all the technological strides it is making.

Whether the company can stay at the top of its game in the long term will be challenging with major players offering related services, such as Apple Passbook, and smaller companies nipping at its heels. But Square opened the Pandora’s box on convenient mobile payments, and it will need its headstart to survive in the face of such an unstoppable global trend.

[Media: Wired, YouTube]

[Sources: SquareTechCrunch]

David J. Hill
David J. Hill
David started writing for Singularity Hub in 2011 and served as editor-in-chief of the site from 2014 to 2017 and SU vice president of faculty, content, and curriculum from 2017 to 2019. His interests cover digital education, publishing, and media, but he'll always be a chemist at heart.
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