Visa makes investment in Square

As Jack Dorsey put it in a tweet this morning: “Absolutely the best way to start or grow your business.” Visa announced today they had taken a stake in mobile payment facilitator Square. The move represents Visa’s interest in reach the many small businesses and merchants that are not big enough to sign up for Visa’s merchant services, which the New York Times estimates to be around 27 million.

From the NYT post:

“But Keith Rabois, Square’s chief operating officer, said the relationship between Square and Visa was a natural one because Square could convert the 27 million businesses that don’t accept credit cards into Visa customers. Square is trying to become more mainstream through a new partnership with Apple to sell Square devices in its stores.

“We’re empowering people to accept credit cards that historically have not,” Mr. Rabois said.

Ryan Donovan, a Visa spokesman, said Square does not compete with Visa’s products. “On the contrary, we believe that Square helps to drive acceptance of payment cards in a segment that has been historically underserved,” he said.”

From Techcrunch:

“So why Visa? Rabois says that while Visa is one of the giants in the industry based on reputation alone, roughly two-thirds of transactions using Square’s payments service are through Visa credit cards. He adds that over time, the partnership means that Square can work on making the payments experience better for Visa customers.

For Visa, the investment gives the company access into the innovations taking place within the company and the mobile payments industry. In February, Visa published a glowing post, praising the startup’s product as a “big deal.” Back then, it was thought that Visa could be looking to partner with the startup or even acquire it. And on Square’s homepage, the company depicts a user swiping a credit card on Square’s mobile reader using a Visa Signature card. It is telling that Square chose to feature Visa, when the reader accepts MasterCard, American Express and Discover, which are all widely used across the globe.

Another important angle to note in this transaction is that with the investment, Visa is standing by Square’s security as a credit card reader. Two months ago, VeriFone, which makes a competing card reader, wrote an open letter to consumers and the industry, warning users of a “gaping security hole” in mobile payments startup (and competitor) Square’s hardware. Dorsey shot back, vehemently denying the security flaw and calling out the apparent flaws in VeriFone’s argument. “

About Daniel Davenport

Daniel is a digital media executive with internet and broadcast experience. Daniel is currently the executive strategy director at THINK Interactive.

Trackbacks/Pingbacks

  1. Isis: “to avoid falling further behind” | thinkd2c - May 4, 2011

    […] big entrenched players.  True innovation will probably have to come from more nimble players like Square, Fig Card and Payphone.  These companies can move quickly, form partnerships without legacy […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: