Square: Banking on your Smartphone
Considering that the company was only founded three years ago, Square, Inc. has become a remarkable force in the mobile payment industry with over one million active users and a current valuation of over $1 billion.
Square is a square-shaped credit card reader that fits into the headphone jack of any iOS (iPad, iPhone and iPod touch) or Android device. The company currently processes over $5 billion a year in transactions, up from $4 billion one month ago. And while they presently operate exclusively in the United States, Square is planning to expand internationally later this year.
The idea for Square came about when Jim McKelvey, a glass artist working out of St. Louis, was unable to accept a credit card as payment for one of his sculptures, due to the high rates and monthly costs that come with traditional credit card processing.
Looking to avoid this inconvenience in the future, McKelvey contacted his former colleague, Jack Dorsey (co-founder of Twitter) and tried to figure out an easier way to make credit card processing more efficient and affordable. The two concluded that by using a smart phone to do the processing, much of the initial costs could be reduced and, thus, offer small businesses and individuals the same opportunities that more established businesses could afford.
In 2009 Square, Inc. was founded. And in January 2010, the same day that the iPad was launched, the first Square app was designed.
The lure of Square’s strength is its simplicity. There are no monthly or annual fees or contracts. Both the app and the Square card reader are entirely free. The only cost is the 2.75% transaction fee, which is comparable to the 2%-5% charge that credit card companies already require.
But it’s not only a card reader. Square recently released an app called Square Register which, essentially, transforms your iPad into a cash register. The app allows a customer to pay a merchant by cash, credit or even by paying with a new, innovative feature called Pay with Square.
Pay with Square is a service that allows a costumer to pay by giving their name at checkout and by confirming the transaction on their Smartphone. The whole ordeal takes only a few seconds and allows the customer to leave their wallet at home. The service could be best understood as a virtual bar tab at a restaurant or pub.
Square’s presence in the credit card processing industry has been so significant over the past three years that other, bigger e-commerce companies have begun to develop similar products. PayPal, for example, is soon to come out with a triangle-shaped credit card reader that appears to work almost identically to that of Square’s reader. The service is called PayPal Here and could be considerable competition for Square in the future.
Currently, however, Square is slowly beginning to form a presence on the Yeshiva College campus.
Torah LeTzion, an organization that financially supports post high school education in Israel, has embraced Square for future fundraising events. “Square is perfect for us. Due to its accessibility and speed we can accept donations where we otherwise might not have been able to,” says Daniel Sherman, a RIETS student and Co-Director of Torah LeTzion.
Sherman also believes that by using Square, Torah LeTzion will be able to illustrate to donors that it is becoming increasingly efficient with its fundraising by embracing current technology.
Further, Storage Bucket, a storage rental company that stores college students’ belongings over the summer break, plans to utilize the perks of Square. Although Storage Bucket already uses a variety of credit card processing services, such as Google Register and PayPal, none seem to match the ease with which Square operates. Zev Lapin, a co-founder of the three-year-old company, is optimistic that Square will enable Storage Bucket to grow this coming summer.
There are merchants, on the other hand, who are opting not to use Square and instead continue to work with the more traditional credit card payment systems. For example, restaurants such as Chop Chop and G2G believe that with their high volume of transactions it is still more economical to pay the monthly fee, transaction fee and percentage transaction fee of their current methods.
But for merchants who do not encounter as much volume in sales, those fees seem to be wasteful. And in those cases, Square seems to be a more viable investment.
To learn more about Square, visit www.squareup.com.