Everything you wanted to know about Square in the payments space

Square is a major player in the mobile payments space. Square manufactures and offers a hardware device which is square shaped and can be ordered by any customer through mail for no charge. The device is of 2.5 cm in length and can connect to a smart phone through a 3.5mm headset jack. Integration between the device and most of the smartphones is highly compatible.

Square app which is also freely available at their website runs on Apple and Android based phones. The Square device and the Square app are used in conjunction to authenticate a user and complete a transaction. Card Case completes the entire transaction process at the point of sale.

Source: Square

Square sees its competition from other major players in the payment industry. Some of them are PayPal, Alipay, PayAnywhere, VeriFone‘s SAIL, Intuit’s GoPayment, etc.

One of the key aspects of determining the success or failure of the players in the mobile payments space is the fees charged to the user for every transaction. Vendors such as PayAnywhere charges 2.69% per swipe and is the most economically feasible player in the market. Companies such as GoPayment, Verifone’s SAIL charge 2.7 % per transaction. Whereas Square’s 2.75% fees is the highest of them all.

Square has been one of the first mover’s in the mobile payments space. Brand recognition and first mover advantage has ensured that Square is a market leader in this space and can charge a premium fee over other players in this space. Ease of use is also one of the key metrics based on which Square scores over others. Through Square users can also track their cash payments in real time which brings in transparency to the entire process. To ensure that the company keeps a hold on its market leader position, Square has introduced a Customer Loyalty Program.

Despite being a market leader, Square has its fare share of problems. Square still needs to work on some of the security concerns reported by its users. The major one being the app keeps a user logged in all the time and if the phone exchanges hands, this can lead to theft of currency.

Square has been going strong since 2009 mostly because of its ease of use and light hardware. There have been efforts off late from players like PayPal to pull back some market share. It will be interesting to follow what PayPal comes up with and how will Square defend its dominant market share in the mobile payments market.

LTP View: Square's business model has not been clear to us. Square started off focusing on producing hardware which could integrate with the smartphone for payment purposes. Since its association with Starbucks, Square has been developing mobile payments based apps. It seems like Square did it to get mass recognition by being associated with major player like Starbucks.