Thursday, April 26, 2012
Dorsey outlined for Rose his vision of where Square is headed both as a company and as a technology. He reported Square is now processing an annualized $5 billion through its payment system – up from $4 billion just one month ago. In addition to other competitive advantages, Square's 2.75 percent per transaction processing fee is "significantly cheaper" than traditional industry processors' rates, Dorsey noted.
"We want to bring [Square] around the world," Dorsey said. "We want to be the point of sale for every merchant and we want to be the way people initiate a payment and start to pay [not only] their local shop but also the larger shops."
Dorsey said his company's first concern is not necessarily payments. "What we really care about is transforming people's relationship with their money," he said. "Money is a concept that has been around for over 5,000 years. It touches every single person on this planet and, at same time, every single person who runs into the concept of money feels bad about it. It feels like a burden. It feels like something they have to deal and we can take all that away."
Dorsey stated the best technologies "fade into the background, and they are relevant when you want to use them and they get out of the way when you don't. So one of the things we are most excited about with Square is that we've built this system called Pay with Square where consumers can download an application and can link a credit card and can see all the merchants around that accept Square and can go to one of them and simply open a tab."
Pay with Square automatically displays the name and photo ID on the register of a merchant who accepts Pay with Square when a customer enables the service within 10 feet of the register. The customer doesn't need to handle a card, phone, PIN pad or money at the POS. The consumer can grab the item desired and take it to the POS where an employee records the transaction. Then the customer can then walk out without having to complete the usual payment step. A receipt is automatically sent to the customer's phone.
Describing the customer experience, Dorsey said, "I don't have to bring my wallet out. I don't have to bring my phone out. The technology just disappears completely."
When Rose asked Dorsey about security and Square, Dorsey replied, "Security is always evolving. You build a block; someone breaks it. You build [another] block; someone breaks it. The cycle will never disperse. Security is not a question of the strongest barriers but of the policies and the expectations you set around the data and around the interaction and the realization it is always evolving. It always has to change, and we always have to make it better."
Payments industry consultant Paul Martaus of Martaus and Associates said he sent the link to Rose's Dorsey interview to friends and clients. In response, "a CEO from a major processor told me we all have a lot to learn from this guy," Martaus said.
When asked about Square's 2.75 percent per transaction processing fee, Martaus said, "You can't beat their rate." However, he noted it is not clear how the company is planning to handle new fees such as the Visa Inc. and MasterCard Worldwide usage fees known, respectively, as the Fixed Acquirer Network Fee and the Annual License and Registration Fee.
Martaus believes the drawback to Square is risk. "Underwriting remains a big issue," he said, adding that few merchants know that if they reach a transaction threshold determined by Square, the company can lock the account and hold the money until it determines no fraud involved is in the transactions. "Merchants never know when they will get thrown off the network," Martaus said.
Martaus also pointed out Square faces other significant challenges. "Square and companies like PayPal freely admit they want to change the way the American consumer thinks about money," he said. "But there are two things those companies don't have: one, feet on the street to enlist merchants; two, a consumer base other than social media." 
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