If they become the new merchant-interface, there's nothing stopping them from offering an alternate payment mechanism that doesn't rely on credit or debit cards.
I'm an engineer at Square, so I can neither confirm or deny such speculation ...
but in an interview with Wired, CEO Jack said
"People understand credit cards. They know exactly what to expect from them. They’re used everywhere. But Square is payment-device agnostic. It doesn’t matter how you pay. Some of our users accept only cash."
http://www.wired.com/magazine/2011/05/mf_qadorsey/all/1
Building the technology that could support Visa/MC/Amex alternatives and the userbase that gives it critical mass is probably the best way to get bought out by Visa/MC/Amex at an inflated price. No one says they actually have to ship their alternative payment system.
Another is that Visa believes that Square is a threat, thinks they may be successful and has invested to mitigate that threat, get visibility into their activities, and so on.
You hope the iPhone or iPad doing the payment processing with the Square device is connected via network cable? I'm afraid I have some disturbing news for you.
I think some, but not all, will pay data plans. Square doesn't require a data plan, as evidenced by it being compatible with the iPod Touch, which has no radio:
> Requirements: Compatible with iPhone, iPod touch, and iPad. Requires iOS 4.0 or later.
I run an annual used ski equipment sale. We rent credit card machines and have a merchant account set up just for that weekend. We pay $0.22 + 1.79% per transaction. Our average transaction is >$100 so this is cheaper than what Square offers. Am I getting an unheard-of deal? Or is Square's rate really not that great?
If my algebra is correct, Square's fee is lower for purchases under approximately $23. In your scenario where your average sale is higher than $23, you do end up paying more with Square. The article suggests that they're targeting coffee houses, casual restaurants, and other places where their average sale is below that threshold. That benefit is in addition to the lower cost of terminals and the added features supplied by their apps.
That rate is what our accountant told me to put into the accounting software. I didn't actually see the statement. I can tell your that our average transaction is $205 and it's all card-present. There were 1031 transactions over two days. Maybe the tiers average out to that rate.
Nope. Disruptive technologies generally serve underserved parts of the market (often those who can't afford the current solution) by providing a good enough solution. Then with scale and time, the disruptive technology matures enough to replace the incumbent. Edit: read http://en.m.wikipedia.org/wiki/Disruptive_technology
Then you'd imagine incorrectly – see above, there's an entire industry around accepting payments for goods and services. The economics are often terrible and the UX sucks for everyone. Square is disruptive because it's better for everyone – the merchant and the customer. The only one getting screwed for a change is the payment processor. Hence, disruption.
How is the processor "getting screwed" here? Again, for a great many businesses Square is the (significantly) more expensive option.
I get that they're killing it at craft fairs, but I'm the with the thread-parent...I don't see what the "disruption" is here.
*edit: Re-reading this I realize that it seems like I'm implying that Square is a bad product... which isn't what I'm saying. I think they're going to make insane amounts of money (I'd invest in them given the chance). They can be huge without being truly 'disruptive', however.
I showed the Square reader to my hippie friend who sells hand-made jewelry in an outdoor booth at a beach resort. He thought it looked pretty cool, and was seriously considering buying an iPhone and service plan just to use it. At his usual transaction size and volume, traditional credit-card payment systems weren't that great a prospect. That's what a disruptive technology does.
Setup is effectively free and incredibly easy. They're disrupting the gorillas of merchant services, by tapping into a market that your Visas, MasterCards, AMEX haven't been able to get to: local, small business owners.
It's disruptive because it changes the customer demographics for some of these businesses and the way they think about payments (customer analytics, payment options, loyalty programs).
Square is poised to gain market share very quickly AND there's a huge play to be made in emerging markets where the mainstream guys haven't found great traction and smartphone usage is growing rapidly.
