Square Reader and iPhone
 

Square, Inc. is a merchant services aggregator and mobile payments company based in San Francisco, California. The company markets two applications and services, Square Register and Square Wallet. The company was founded in 2009 by Jack Dorsey and Jim McKelvey and launched its first app and service in 2010.

 

Square Register allows individuals and merchants in the United States and Canada to accept debit and credit cards on their iOS or Android smartphone or tablet computer. The app supports manually entering the card details or swiping the card through the Square Reader, a small plastic device which plugs into the audio jack of a supported smartphone or tablet and reads the magnetic stripe. On the iPad version of the Square Register app, the interface resembles a traditional cash register.

 

Square Wallet allows customers to setup a tab and pay for their order simply with their name (or a barcode) using a stored credit, debit, or gift card.

 

In August 2012, Starbucks announced it would use Square to process transactions with customers who pay via debit or credit card. Starbucks will also reportedly invest $25 million in Square, with Starbucks chief executive officer Howard Schultz becoming a board member of Square, Inc. 

 

History

Creation

The original inspiration for Square occurred to Jack Dorsey in 2009 when James McKelvey (a St. Louis friend of Dorsey at the time) was unable to complete a $2,000 sale of his glass faucets and fittings because he could not accept credit cards. 

 

The name "Square" refers to the Square card readers which are square in shape. The name also refers to the commonly used phrase for payments: "Are we square?" Several other names were also considered but rejected, including squirrel, stash and wallet. 

 

Growth

Introduced in early 2010 by Square Inc., the Square application is available for the iPhone, iPod Touch, iPad and Android-based mobile phones. Square was co-founded by Twitter creator Jack Dorsey. Dorsey also serves as chief executive officer and Sarah Friar serves as chief financial officer.

 

Square currently has more than 400 employees.
 

At the TechCrunch Disrupt conference in May 2011, Square announced the release of two new apps, Card Case and Register. Card Case allows customers to view merchant menus, do mobile payments, receive virtual receipts, and discover other Square-enabled merchants. Square Register is point of sale software aimed at replacing traditional credit card terminals and cash registers.

 

Square's current office is located in the Chronicle Building on Mission Street in the South of Market neighborhood of San Francisco. 

 

Financials

Square received angel investment from Marissa Mayer, Kevin Rose, Biz Stone, Dennis Crowley, Shawn Fanning, Ed Cramer, and Esther Dyson. Since then, it has raised several additional rounds of funding:

 

• Series A funding from Khosla Venture

• series B funding from Sequoia Capital

• Series C funding from Kleiner Perkins Caufield & Byers

• Series D funding from Citi Ventures, Rizvi Traverse Management, and Starbucks

 

The company's valuation in September 2012 was 3.25 billion dollars. 

 

Business model

Square currently provides its card readers for free to its users. The Square app is also freely downloadable from the App Store and the Google Play Store.

 

Square charges a fee of 2.75% on every credit card transaction. This rate is higher than the rate charged by conventional credit card processors, but Square claims that the conventional credit card processors also include many hidden costs which are never disclosed to the customers. Square does not have any additional fees beyond the 2.75% per swipe (or the 3.50% plus $0.15 cost per manually-entered transaction) - there are no monthly fees or set-up costs. Square claims that its costs are, on average, lower than the costs charged by the conventional credit card processors. Square is regarded as a useful app for entrepreneurs, including for example consultants, food truck operators, and traditional retailers.[ In August, 2012, Square introduced a flat rate plan, whereby a flat fee of $275.00 per month is charged, and is all-inclusive. The flat rate plan is available to all merchants with under $250,000 in yearly credit card sales, and no more than $20,833 in monthly sales. When the monthly or annual maximum sales are exceeded, the plan reverts to the traditional 2.75% model.

 

Square is trying to build a two-sided market with an interesting market staging model. Payments is a space which is especially difficult to get into, partly because it is very difficult to have a critical mass of buyers and sellers start using your payment mechanism simultaneously. Square is solving this by targeting one group at a time. The standalone credit card swiping value proposition was enough for merchants to start adopting the product. The consumer side of the equation, which is still kicking in, has the potential to disrupt retail payments altogether but that was not the dream that was sold to the merchants originally. 

 

Swiped payments are deposited directly into a user's bank account within 1-2 business days. In some instances, Square may withhold payments to its users pending issues related to chargebacks.

 

Technology

Square's original reader consisted of a simple read head directly wired to a 3.5mm audio jack, through which unencrypted, analogue card information was fed to smartphones for amplification and digitization. Square's technology is PCI compliant and Verisign certified.It uses strong encryption on its devices, including SSL and PGP.[  Its cryptographic keys are at least 2048 bits in length. Card numbers, magnetic stripe data, or security codes are not stored on Square client devices.Square follows the guidelines issued by OWASP.

 

Reception

Business Insider praised the product for its "ease of use, simplicity and elegance". Business Insider favorably compared Jack Dorsey with Steve Jobs for what they call his "entrepreneurial vision and charisma".The Next Web praised Square's website squareup.com for its design and aesthetic appeal

 

The product was also showcased at Apple's iPad 2 event.

GigaOM called the product a disruptive innovation. 

 

Criticism

In March 2011, rival payment company VeriFone claimed that the Square system was insecure, and that a "reasonably-skilled" programmer could write a replacement app which could conceivably use the Square device to skim a credit card and return its details. VeriFone posted a demonstration video and sample skimming app to its website.[Dorsey called VeriFone's claims "neither fair nor accurate", noted that the card data could be gathered visually from the card, and said that the claims ignored the fraud protection provided by card issuers.

 

In January 2012, California Herbal Relief Center, a nonprofit marijuana clinic, filed a lawsuit against Square, Inc. The lawsuit claimed that Square, Inc was withholding thousands of dollars from the nonprofit corporation. The case was dismissed with prejudice on March 15, 2012. 

 

Square's support is handled via email, YouTube videos, a Twitter feed (@SqSupport), and an online help center. Square does not offer phone support for customers, including for emergency situations. Once criticized for delays in dealing with customer problems, its current turnaround time to customer inquiries is less than 24 hours.