Why Square Is Succeeding in the Hyperlocal Payments Space

Square’s star seems to be quickly rising, with $5 billion in annualized transactions and a 25 percent jump in payment volume over the previous month.

Why? Well, it’s pretty simple: “There are over 26 million small businesses in the United States that don’t accept credit cards. The ability to accept credit cards is one of the quickest and most effective ways for small businesses to increase revenue, and Square makes this easier than anyone,” a Square spokesperson told Street Fight.

But does it? PayPal also has a mobile payment system, which launched a feature that’s remarkably similar to Square’s service. It’s already seeing impressive pickup, with over 300,000 people singing up for card readers. Neither one is better than the other. Although PayPal’s service debuted much later than Square’s, the company already has name recognition (as well as 110 million users worldwide) which should allow it to gain ground quickly.

Square’s marketing campaign is focused on helping businesses better serve their customers: “Small businesses have little to no insight into their sales; meaningful data and actionable intelligence require either a great deal of time and sophisticated analysis (which they can’t do), or purchasing third party software for lots of money (which they don’t have). But we’re providing them — for free — the tools and analytics typically available only to big-box retailers, which they can use to make informed decisions about how best to grow their business.”

But that’s only one side of the equation. The March launch of Pay With Square allows consumers to use the service even more easily and find vendors listed in the 75,000-merchant-strong directory. The service encourages consumers to explore other places that use Square. “We’re focused on improving the entire payments experience for buyers and sellers and we think we can do so by connecting both sides of the counter in a meaningful way,” Square’s spokesperson said. This is smart, something that encourages early adopters to deepen their attachment with the product and, presumably, spread the gospel.

But Square’s biggest advantage is its founder, Jack Dorsey. Not because Dorsey’s a genius — he is that, too — but because he’s (understandably) a media darling. In the last few months, we’ve seen glowing profiles of him in Fast Company (“a modern Edison in a cynical age”) and Wired. For a company that needs visibility, there’s nothing better than having a leader magazines want to profile and conferences want to recruit to speak. (It also helps that he has the name recognition from founding Twitter, a company he also runs.) Dorsey sees the future but, more importantly, he knows how to achieve that future and explain why we need it. Vision is one thing; being able to articulate that vision is entirely another.

The positives of Square are many: low fees (2.75% compared to up to 4.75% for other credit cards), analytics for small business owners, a coolness factor, and a brilliant, likable, quotable founder. The company has large obstacles to overcome, from the entrenched banking industry as well as other competitors such as PayPal, but they are off to a good start. The future looks closer than ever.

Noah Davis is senior editor at Street Fight.