On Dorsey, Square, and Making Payments More Human

by Mercator Advisory Group 0

In an excellent article from Wired, both the personality of Jack Dorsey and the ambitions of Square are explored. The call-out below should dispel any notion that Square is just a simple mobile-payment acceptance company. That’s just where it starts.

Like so many Internet-powered propositions, Square’s started with an approach that is about the network effect. The more participants, the better. If only the NFC ecosystem was similarly focused on using the network effect to build up transaction volume. With almost everyone in the NFC-value chain anxious to grab and control the first revenue, it is going to make it much harder for NFC to reach a level of ubiquity. NFC is great technology. It’s the business relationships that are all askew.

Of course, Square has a simpler task because it controls most of its domain. Because it operates across the payment acceptance device, the merchant’s register, and the consumer’s handset, Square could create a very compelling user experience. That’s what this article is largely about. With NFC, consumers will find it works here but not there, andhat some of their cards will only work with a particular wallet or over a particular mobile operator’s network. If that goes on too long, consumers will gravitate to merchants leveraging the Square approach and merchants may pay for that privilege if it makes their customers happy and increases sales.

From the Wired article:

But Register’s real value is that it offers sophisticated analytics for free. Its users get data that allows them to identify which products are selling and when, and future versions will be even more powerful. “As a customer enters the vicinity of the establishment, a notification will spring open on the merchant’s screen,” says Megan Quinn, Square’s director of products (who has since left the company). “It will show the customer’s name and suggest their most likely order, based on an algorithm that knows past purchases and things that sell well at the store.”

Henderson, the engineering lead on Pay With Square, points out that the company collects all kinds of information about its users, data that might be invaluable to merchants and customers alike. “First of all, we know your location,” he says. “Second, we have a decent sense of your history. We know the kinds of places you’ve been and what you like. But we also know lots of other things—like if there’s a whole bunch of food trucks that pull up nearby, we’ll see the spike in activity and can point you to those trucks. I think you’ll see us get really good at this.”

Analytics and data-mining might provide Square’s real business model. So far, the company has charged a very small fee for each transaction, and merchants aren’t likely to pay much more. And while Square has been giving participating merchants access to analytics about their businesses for free, it is also aggregating that data, real-time information about what people are buying in every region of the country, complete with detailed demographics. It’s reasonable to think that might be very valuable in the near future.

Square is still focused on smaller merchants, but its executives believe that even tier-one retailers will use Square before long. “The Neiman Marcuses and the Walmarts will want to have an emotional attachment with their buyers, where anybody can walk in and pay with their name and have an electronic receipt,” Rabois says. “That’s what we’re going to deliver.”

Click here to read more from Wired.