Yep, It’s Hip to Be Square!

by Scott Loftesness on April 27, 2011

in Innovation, Merchant Acquirers, Scott Loftesness, Square, Visa

Scott Loftesness - Glenbrook Partners

Some 17 months ago, I wrote a post here titled “It’s Hip to Be Square” following the launch of Jack Dorsey‘s then new company.

At the time I wrote:

Square seems to be aiming at democratizing merchant card acceptance for physical face-to-face card transactions – a heretofore arcane marketplace that required folks like you and I to qualify for traditional merchant accounts from merchant card acquirers.

PayPal had essentially done that earlier – but for online ecommerce merchants. Square was intending to do it for physical world, face-to-face merchants – suitably equipped with iPhones (and, later, iPads).

At the time, many in the industry wondered about the approach that Square was taking and whether its merchant aggregation model would work in the real world. Those questions mostly revolved around the card network rules and how they might or might not accommodate this kind of innovation.

We now have a clear answer.

Today, Square announced that it had received a “strategic investment” from Visa. According to the Wall St. Journal, Visa’s John Partridge said in a statement that Visa “invests in payment innovations that can enable more businesses to accept Visa.” Today’s announcement followed on the heels of recent news about Square’s payment acceptance solution being distributed through Apple’s stores.

Square’s obviously on a roll – and the “democratization of payments acceptance” theme seems to be well established. For the card networks, good business based on the growth of branded volume is the name of the game. Innovators like Square – and its competitors including Intuit’s GoPayment – are all about expanding card usage and simply good business for a card network like Visa.

For a payments geek like me, it’s great fun to watch the winds of changes as they blow through the industry. On the one hand, innovators like Square are pushing the frontiers of making card-based payments easier and more convenient. On the other hand, we see the ratcheting up of requirements to better secure card-based payments going forward. Both are obviously important.

At the end of the day, it’s no longer about card network rules and “sacred cows”. It’s just about good business. And, about growing that good business whenever new technology and new business processes enable new solutions as is clearly the case with Square.

What do you think? Share your comments below, give me a call at +1.650.469.3421 or send me an email:

5 Responses to “Yep, It’s Hip to Be Square!”

  1. Square is to be congratulated for progress they have made with mobile card acceptance. They have successfully created an offering where smart phones can be extended to support face-to-face card acceptance. Now big players like Apple and Visa and jumping on board – which is good for Square, good for the category of mobile card acceptance, and good for mobile payments.

    Mobile payments in the US is behind other markets – especially Asia and Africa. It is great to see local successes which will help create the market momentum in the US. I have always believed mobile payment success will come from the combination of mobile innovation and legacy payments. Square’s success is a testimony to the validity of that approach. We should all celebrate this momentum since mobile payments is such a big opportunity – any success will help the entire market unfold.

  2. Steve Klebe says:

    This reminds me of the late 1980s when ISOs (independent sales orgs) appeared on the scene. I had been with Verifone for 2-3 years and banks were the only ones buying terminals on a regular basis. Very rarely a large merchant might make a direct purchase. Then, all of a sudden we got an order from this company we had never heard of. Orders from banks were taken over the phone or fax and we would just ship out cartons of terminals. We had no system for credit checking, etc. So, we took the orders figuring these companies had been vetted by the banks that had contracted them to sell merchant processing on their behalf. Well, most of the companies were legit, but as we found out not all were. We had the first bad credit experience and life as we knew had to change. Those of you around at the time also know how bad some of these companies behaved when it came to the hard sell and $50/month 5 year leases for a terminal that was worth $200. Eventually this all got cleaned up and without question, if it was left to the banks to drive the adoption of electronic auth/capture at the POS, we might still be waiting.

    QUOTATION: Those who cannot remember the past are condemned to repeat it. ATTRIBUTION: George Santayana

    • I remember circa 1989 when I was living near Boston. Will never forget stopping in at my local wine shop in Concord one evening where I noticed a new Verifone Tranz330 behind counter. I asked the proprietor about it.

      He was oh so proud. “Just got it. This guy was in today and I got the last one he had.”

      Oh really? What did it cost? “The guy gave me a special deal since it was the last one – $1,500.”

      Hmm. Probably cost the ISO maybe $400? Such a special deal! I’m sure that particular ISO had a bit of a celebration that evening himself!

  3. I am now eagerly awaiting help from Visa to solve the one remaining issue with Square as it applies to my own mission of serving the under-banked: allow hard working contractors and freelancers who use a re-loadable prepaid Visa card, to be accepted as Square merchants even though they don’t have a bank account. Today, the routing numbers of prepaid card accounts are rejected by Square during merchant registration. By the way, so are they by PayPal.
    This will be the hyper-democratization of card acceptance.

    • Patrice, most interesting. Presumably this is primarily an underwriting decision by Square (or PayPal) and the actual acquirer? Or – perhaps now I’m understanding your point better – are you saying the bank routing numbers that you’re linking to your prepaid card accounts are being rejected?

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