Mobile payments appears to be the next industry for tech giants Google and Apple, however a relatively young player is making a splash in a big way. Square, who feature a signature bite sized card reader that plugs into the earphone jack of iPhones and iPads to read and instantly process credit card payments is the biggest name in mobile payments today.
TQ reported in April that the firm, which is a pet project of Twitter co-founder Jack Dorsey had successfully risen close to $250 million. They’re back at it again, with a reported $200 million coming their way in a new funding round led by Rizvi Traverse Management. The additional funding gives Square a $3.25 billion valuation, not too shabby considering the company is all of three years old.
Square has several prominent backers from its previous funding rounds, including Sequoia Capital and Kleiner Perkins Caufield & Byers, however these firms chose to keep their pocketbooks closed for this latest round. Word on the street is that Square is aggressively seeking a $4 billion dollar valuation, which at this time may be too rich for some.
The main problem, if any that Square faces is the profit model surrounding their payment system. Square provides card readers as well as a free app for anyone running a small business however they charge a 2.75% processing fee per transaction. From this amount, they pay the credit card companies and keep the remainder themselves. The company therefore makes very little per transaction even though they have reached $6 billion in processed transactions.
The next step for Square is garnering income from two relatively new services, Square Register and Pay With Square. The Register allows iPads to be turned into credit card registers for small businesses. Pay With Square on the other hand allows credit card accounts to be turned into “tabs” with specific vendors. Patrons are then able to select their latest items and tell the cashier to charge it to their tab. Photo confirmation is made using Square software and the transaction is processed.
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