Smartphones, Squares, and the Merchant Acquiring Market

by David Fish 0

Since the dawn of the bankcard industry, thecard payment acceptance market has grown in fits and starts as newmerchant categories have embraced card payments. For the last fewyears and until very recently, the U.S. market for card acceptancehas been all but saturated by the very industrious serviceproviders (banks and ISOs) charged with enlisting merchants intothe various card payment networks and acquiring their payments. Theestimated 8 million or so merchant outlets that took card paymentsin 2008 and 2009 represented just about the wholeopportunity.

That is, until the smartphone revolution and the card readeradd-on came along.

Witness a disruptive market entrant like Square. With the factthat Square surpassed $1 million in payments processed perday in late February, the point that they amassed $66million in volume in Q1 2011, and the news that Visa has made anequity investment in the company (validating its business model andgrowth prospects), we can safely say that the merchant acquiringspace has been broken wide open to an unprecedentedopportunity.

Here’s why: The recent news surrounding Square includes another(even more interesting) data point: there are 24 million U.S. smallbusinesses that don’t accept cards for payment. I’d wager (andmaybe so would Jack Dorsey) a few of them have smart phones. Someof them may even be looking for new ways to get paid.