Square gets strategic investment from Visa

Sep 21, 2019 isjscowe

first_imgJack Dorsey who is the founder and Executive Chairman of Twitter is also the CEO of a company he founded called Square. Square offers individuals and small business owners the ability to use their smartphones to take credit card payments without any contracts or monthly fees. Just a simple 2.75% per swipe is charged to process a credit card and all that is required is an application which is free to download an a credit card reader which plugs into a smartphone’s audio jack.Square’s business model is quite a threat to traditional credit card terminals used by most businesses. One of the largest providers of those terminals is VeriFone which back in March went on the attack accusing Square of poor security due to their card reader’s inability to encrypt credit card information. VeriFone even went as far as sending a copy of a credit card skimming application they wrote for use with Square’s reader to major credit card companies including Visa, MasterCard, Discover and American Express. So what was the response? It was probably not one VeriFone was expecting.Visa this week announced that it was making a strategic investment in Square though an exact dollar amount wasn’t disclosed. It seems Visa’s interest in Square is the fact that the company has the potential to currently tap into the 27 million businesses and individuals who currently don’t accept credit card payments. On the same day the investment by Visa was announced, Square also announced that it would adopt the mobile acceptance best practices just released by the credit card company. This is another set of great news for Square who just recently got a boost from Apple who has decided to offer the company’s credit card reader online and in Apple retail stores.Read more at Visa and the Wall Street Journal.Brian’s OpinionWhen VeriFone went on the attack so strong against Square their real intention was so transparent. After all, businesses switching to Square’s simplified smartphone model of accepting credit card transactions would be bad news to Verifone and other traditional credit card terminal companies just like it. It just tickles me to think what VeriFone executives must be thinking today now that Visa has put their full support behind Square.To put it bluntly, VeriFone clearly underestimated the reaction by Visa to Square’s business model. It makes absolutely no sense for Visa to continue to stick with traditional credit card terminals alone when they know the new smartphone-based system offered by Square puts the ability to process credit cards into the hands of small businesses and individuals who don’t take them now. That means Square could be Visa’s gateway to reach millions of new customers and process millions more in credit card transactions.When Apple announced it would offer the Square credit card reader online and in stores I thought that endorsement was just the kind needed for Square to really take off. Now that Visa’s on board as well I expect Square’s customer base will skyrocket much to the displeasure of VeriFone. If VeriFone was really smart they would quit trying to crush Square and attempt to buy the company, but I would imagine that Jack Dorsey wouldn’t accept such a deal purely out of principle at this point.last_img

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