The following is an excerpt from EMILY MALTBY | September 19, 2012 | WSJ.com |
Jack Dorsey is hoping his latest start-up, Square Inc., can shake up the credit-card industry the same way another company he co-founded, Twitter Inc., has shaken up social media.
Square lets merchants process credit or debit cards using their smartphones or tablets. The service is used by about two million merchants, the company says, most of them small businesses such as boutique retail shops. It is also being rolled out at U.S. Starbucks Corp. stores.
Square closed its fourth round of funding this week, raising more than $200 million—and is now valued at more than $3.2 billion.
But the market for so-called mobile payments is crowded. On Wednesday, daily-deals site Groupon Inc. rolled out a payments service on the iPhone and iPod Touch for any merchant that runs a promotion through its site. PayPal Inc. and Intuit Inc. also have competing services that process credit cards on mobile devices.
The U.S. mobile-pay industry currently handles about $11 billion in gross payments volume, according to Rick Oglesby, an analyst at Aite Group LLC, a Boston financial research firm. That could reach $57 billion within three years, he estimates.
Square, based in San Francisco, provides its square-shaped card readers free to merchants, who then pay a 2.75% per-swipe fee. Smaller merchants have the option to pay a flat $275 monthly rate.
Last year, Square introduced a mobile app that retains consumers’ payment information and a photo, allowing them pay by providing their names at the register. The cashier can look up the name, verify each customer by the photo and ring up a sale.
Square’s revenue rose to roughly $42.5 million in 2011, from $2 million in 2010, according to PrivCo.com Inc., a New York research firm that provides data about private companies. Square declined to confirm revenue figures.
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