Why Square will be huge
When Square started out as a way to accept credit card payments, it marketed itself as a tool for small business. Now even Starbucks is accepting Square. Amazing when you realize the company is barely 2 years old.
Payments and banking are notoriously hard industries to get into, but seemingly worthwhile because of its enormous volume. There are lots of interesting companies and developments in this space. Every single one with a different angle on how we should transfer money from a to b.
BitCoin and associated startups try to bring anonymous and independent payments to the masses. Dwolla tries to bring wire transfers to the US and Simple is trying to lure customers with its clear and customer-friendly service. Visa, AmEx and PayPal try to get a hold on the mobile payments markets, without much luck.
Square initially focussed on making it possible for anyone to accept credit card payments. From the local gallery owner down the street, to your buddy selling a nice vintage couch. A noble cause and seemingly not too threatening for traditional credit card companies; they were focussing on small business.
Surprise, surprise, a lot of little transactions make up a lot of transactions altogether. How much exactly? About $10 billion annually. This may not seem like much, but remember who Square’s customers are? Small businesses. These are the users who are able to switch out their payment provider in a heartbeat. These are the people who will serve as advocates for your product.
As the icing on the cake, Square released their accompanying Register iPad app, which functions as a point of sale system. Not only does it provide the basic functionality of a register, but it allows customers to put purchases on a tab and pay with their name. At this point Square has created a superior checkout process virtually unrivaled in the industry.
Last week Square launched gift cards, which can be created for every store that accepts Square and can be gifted to everyone with an email address. These gift cards are basically Like buttons for the real world. New people are introduced to Square and merchants get additional business.
The simple lesson that can be learned here is that you shouldn’t just iterate your product development, but also your market development. Square did a great job at establishing a user base among merchants, followed by their user base among customers.
Let’s not forget that Square was founded by Jack Dorsey, co-founder of Twitter. It’s impossible to say where Square would have been without Jack and his resources, but it’s fair to say that Square is going to be huge.