More Square-Love from the Biz Press

by Mercator Advisory Group 0

The headline hyperbole over Square is getting boring, repetitive, and inaccurate. The headline “A Twitter Guy Takes on Big Banks” hardly describes either Jack Dorsey’s initial vision or the company’s current offerings. As the article eventually gets around to saying, Square could increase bank card volume simply because more payments are being made at the smallest merchant part of the market. Given the low volume and ticket sizes characteristic of this sector, I’m sure the acquiring banks are glad to have someone other than the ISO channel to pick up what is essentially noise in the overall retail scheme.

What is more interesting, and comes at the end of the article, is a brief musing over what Square could do for the post-card world. I’m assuming that means Square is looking at using NFC as the means to secure mobile transactions and becoming an intermediary in the broader mobile payments realm.

Square is going to find plenty of company in that space, and that company will include giants with smart people and deep pockets, like Apple, like Google, Intuit, and (oh by the way) Visa and MasterCard may have something to offer along those lines, too.

The star power of a Silicon Valley success is nothing short of remarkable, even though Twitter itself is hardly a revenue bonanza. Square itself has a lot to do to prove its viability.

And while Dorsey likes to say he’s disrupting and innovating in financial services, Square doesn’t address the part of the business that’s ripest for change: the steep rates credit card companies and banks charge for each card transaction. In fact, if Square succeeds, it will benefit the banks that issue credit cards and payment processors such as Visa (V) and MasterCard (MA). That’s why J. P. Morgan Chase (JPM), one of the largest U.S. banks, was one of the investors in Square’s recent round of funding.

Still, the big banks can’t necessarily be sure if Square is friend or foe. Its service today siphons off merchant-banking customers — and credit card holders could be next. Dorsey hopes to eventually do away with the readers altogether and turn Square into a digital payment platform for consumers that lets people make payments without plastic — they could simply transfer money from their Square account to a store or supplier, bypassing the credit card and its potential late fees and interest charges.

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