When buzz began bubbling up around Square about a month ago, the industry took notice. Many charged that was due mainly in part because the driving force behind Square was the co-founder of Twitter, Jack Dorsey. Many industry insiders, like MagTek CEO Mimi Hart, raised security concerns around where the consumer’s data was encrypted.
There have been a number of devices to hit the market recently. Most notably was VeriFone’s PAYware Mobile iPhone payments device. In a recent video interview with Tech Crunch, Dorsey was asked for his reaction to VeriFone’s announcement as seen on PYMNTS.com. In the announcement, VeriFone CEO Douglas G. Bergeron said, “Banks and processors are concerned about the security issues of unapproved merchants using unregulated software and insecure fobs to accept card payments.” When asked if he thought Bergeron was taking a swipe at Square, Dorsey took the high road and explained that Square would be going through the same PCI compliance measures as VeriFone or any other device would.
Whenever Dorsey has demoed the device, he has made it clear that the device is just a small component of what Square is about. He has said that he and his Square-mates are interested in redesigning the payments experience. PYMNTS.com asked “Paying with Plastic” author and industry expert David S. Evans to speak with Dorsey about why Square is “what’s next” in payments.
David S. Evans: I’m here today with Jack Dorsey. He is the guy behind Square. A merchant can attach a Square dongle to her iPhone and accept cards with Square service. Jack, when I bought my iPhone a year ago or so, the clerk at the Apple store swiped my card on an iPhone and had me sign. What’s new with Square?
Jack Dorsey: Well, the biggest thing about Square is not necessarily the hardware, although it does allow us to capture credit card information very quickly, but the biggest friction point around accepting credit cards is actually getting a merchant account. So being able to become someone who actually can accept a payment off a credit card, off a prepaid card, off a debit card, is actually quite difficult, and it takes a long time – it’s a very complicated process. So we wanted to get people in and accepting this new form of payments, and this very widely used form of payments in under 10 seconds.
DE: So I gather then, when I first read the press reports on you guys, I was also, I guess, misled into thinking that you were a hardware play. But then I went to your Website and I learned some of the things you just mentioned. It looks like what you’re trying to do is to start a payment system with merchants and consumers, with Square in the middle – what I would call a platform. Is that more or less right?
JD: Yeah, we’re focused on building a utility and really designing the payment experience. We noticed that exchange of value payments in general is another form of communication. And it’s not one that’s really been designed in a very cohesive way so while we do have a key little piece of hardware that allows us to capture credit cards, the real story is in the software, and around the utility aspect of what we’re doing. We think we have a platform that can scale all the way from a major retail institution like Apple, where people are going around the store and doing this sort of mobile retail, going to the product and charging right there, all the way to someone selling their couch on Craig’s List.
DE: Are you guys acting as your own processor or do you have a deal with someone else who’s doing the actual processing?
JD: We’re working with a number of processors, and what we’re trying to do is just minimize the number of moving parts and minimize the layers in between. Someone who’s accepting payments from these payment cards and the banks and the associations themselves, so we have very, very few hops between those, and that allows us to really guarantee a level of service and really pay attention to the transaction and every detail around the transaction.
DE: So if I’m a small merchant, are you sort of my one stop shop, so I contact you guys and you guys take care of the rest, I don’t need to apply for a separate merchant account?
JD: Yeah, so you basically – the sign-up experience is like this: If let’s say you have a food cart in New York City or San Francisco and you want to start accepting credit cards, you basically download the application from currently the app store There hasn’t been much yet but you download it on the app store, you provide a picture and a name of your company or your personal name, and an e-mail address, and you can start accepting payments immediately. There’s no contracts, there’s no monthly fees, no setup charge, so if you just have an iPod touch and our software, then you’re in business.
We’re working on other ports as well, so that we work on the computer and we work on BlackBerrys and Androids as well, but the idea that anyone – not just small merchants, but anyone who needs to accept a payment off of a plastic card can go through that same experience. So if I just decided to sell my MacBook Air through Craig’s List, and I want to accept a credit card payment for it, I could.
DE: Is Square “what’s next” in payments? Is it something that could really transform the business?
JD: I think it’s a really needed and required iteration. What we’re most excited about is being able to, again, design the payment experience – really pay attention to the transaction as a form of communication and making it social, making it really exposed – really expose what’s happening. And around that, we can provide a lot of things that I think have been missing in payments – specifically like around the receipt, for instance. We all get these receipts, these paper receipts, that most of the time people are just annoyed to receive because they’re not really useful. So what if we could really turn the receipt into more of a publishing medium, into something that lives on and something that is actually clickable and useable, and something that just exposes the various end points of the transaction. That’s exciting. And we can also build in things like more fraud elements, so you can associate a picture of your face with your various credit cards so that you know that the person taking the payment is always looking for your face. Or we can build in an automatic rewards program so on the 10th visit to a coffee store, we can let the merchant know in real time that that’s your 10th visit and maybe they want to give a free cup of coffee.
DE: It looks like you’re making money from the merchant side. Is that right? It’s mainly the merchant side where your money’s coming from?
JD: Well, we’re not really sure what the end model is. We do think it will be around transactions and there will be a transaction fee for Square, in taking payments over Square. A lot of that goes to paying the credit card companies and banks associated with the credit card companies – just like you would today with a normal merchant account.
But we’re really focused on simplifying that fee. Typically when you take cards, you pay a range of fee. You’re given one fee as kind of the base lowest, but in actuality, you pay a range and no one really knows what that range is because it’s all dependent on what card that the payer puts down. So with Square, we’re looking to offer just two rates – one for people that swipe the card and then one for people who enter in the card manually.
DE: I’m sure you’d like all merchants to adopt Square, but is your sweet spot businesses that didn’t take cards before, like me selling my Mac? Or businesses that like Square better than their current point of sale equipment?
JD: I don’t know, and that’s one of the most exciting things is we’re really focused on just building a utility that can scale to a variety usages – all the ones that you mentioned, but also the larger retail presence. So a clothing store that is selling on the floor or at the dressing room. So we have some ideas around who might get a lot of usage out of this. There’s a lot of personal services that would really benefit by taking payment cards, like piano instructors, golf instructors, flight instructors, baby sitters, dog walkers. Suddenly they can all take credit cards and payment cards for their services. Which makes it much, much easier, not only on the person accepting the payments but also on the person making the payment. If I only need to have my plastic card with me instead of all this cash and worry about having to get cash or running to an ATM, it’s just so much more convenient and so easier than the alternative.
DE: Here’s an annoying question for you – VeriFone, the big point of sale equipment manufacturer, and others, say that they have competing devices. That you’re getting all the hype because you co-founded Twitter. What do you say to that?
JD: Well, I think we’re putting the focus in the wrong place. The hardware that VeriFone is producing is certainly really exciting and very interesting. But we’re, again, really focused on designing that payment experience. And getting people in and accepting credit cards without the need for a merchant account. And that’s the thing about Square, that the hardware is certainly interesting, but really at the end of the day, it makes entering credit card numbers faster and a little bit more secure. But that’s really it. So everything else that Square is focused on, such as the receipts and the fraud and the risk and getting people in immediately in accepting these payment cards is really what’s exciting to us.
DE: Recently, PYMNTS.com talked to Mimi Hart, President and CEO of MagTek. She expressed concerns about security for Square. What have you done to make it PCI compliant and address all the obvious security concerns – the Bulgarian at the store, the hacker stealing all my information.
JD: Right, yeah. So there’s a number of things that we constantly have to iterate in terms of security. Square, when we launch to the general public, will be completely PCI Level 1 compliant. That’s a requirement, not only by us, but by all of our partners and it would be pretty silly for us not to consider meeting that, and also going above and beyond those certifications. But I think the real protection around all of this and in general is really put the controls in the hands of the payers. So one feature that we have is you can associate a picture of your face with all of your credit cards, all of your payment cards, and anytime someone swipes that card into a Square system, they will see a picture of your face. When you charge, you’ll get an instant e-mail receipt or an instant SMS. You’re looking for a signature screen that’s very fluid and very beautiful. So there’s a number of signature aspects around Square that people should always be looking for and expecting. And that helps engender a lot of trust around the system. So, we hope to really point out and educate people along those lines so that they can get used to this new way of paying and really look for those things to make sure that they are indeed transacting in a safe environment with someone who is trustworthy.
DE: What will make you think you’ve been a success a year from now?
JD: I don’t think it’s going to be so short. It’s going to take some time to get there. But as soon as we have a lot of transactions in the world and people are using it to take donations and they’re using it to sell their couch on Craig’s List and they’re coming up with really interesting ways to use the system that we have never imagined. That’s when we’re successful. When Square will also have an API which allows it to be built into any workflow or any system. And when we release that and we see what developers to do with it and also what users do with the system, and the creativeness that they’ll bring to this utility, that’s when we get a lot happier.
DE: You’re going to take some time off for the holidays or you going to spend all your time working on Square?
JD: Probably most of it working on Square. We have a lot of work to do. We’re really excited about extending our beta program around the country. So we’d really like to get this in place in a bunch of different locations, so that payers can really see what this is all about and give us feedback so we can iterate very quickly.
DE: Jack, thank you very much for your time. Square sounds really interesting. We wish you the best of luck with it, and have a great holiday and a great New Year.
JD: Thank you very much, you too.
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