Square: Payment Made Easy

You don’t have to start from scratch to do something interesting, Jack Dorsey

First Commerical Video of Square in 2015

Where did it begin?

McKelvey has a serial of start-up experience, totaling seven start-ups from CD cabinet maker to a glass-blowing studio, including Square. In the beginning, he invited Jack Dorsey to co-found Square when he had trouble selling a $2,000 art piece from his studio. In the meanwhile, Jack Dorsey was voted out by Twitter’s board of directors led by Evan William stating Dorsey was unfit to lead the 3-year old company. Then, within a summer, they developed a direction towards peer-to-peer payment platform, then the origination of Square was established, was named Squirrel in the very beginning.

We believe everyone should
be able to participate and
thrive in the economy. Square’s Vision Statemnet

Business Model — The Hardware

The earliest adopter is Starbucks, Starbucks invested $25 million in Square, and Square became its exclusive processor of debit and credit card payments for all 7,000-plus stores in the United States. It was a successful move for Square to create exposure to market; however, this partnership has cost Square a $71 million losses, the vast majority of Square’s transaction costs come from fees paid to Visa, MasterCard, and other credit card companies.

Source: Amazon.ca

Business Model — Software Integration

Business Model — Lending Services

Business Model — Food Delivery (Discontinued)

Business Model — P2P Payments/Banking

It’s really complex to make something simple
Jack Dorsey, 2011

In simpler terms, Square till now does not have a fixed value proposition in the commerce or fintech platform. However, Square has solved many business owner’s struggles, from payments to POS management to cash flow problems and, ultimately to cash transfers.

Strategy 1: Hardware & Software Synergies

Square’s go-to-market strategy leveraged the hardware technology in smartphones and introduced an extension tool to collect a payment, directly substitute credit payment machines. Adopting its software has vertically integrated within its data structure, generated a synergetic effect. The Square Reader is directly connected to its software, which made data more accessible and more comfortable to monitor financial performance.

To summarize, Square’s hardware product interacts together with its POS software services in a synergistic way, such that the value of the ecosystem is greater than the sum of its constituent products.

Strategy 2: Shopify-like Ecosystem

The idea of the Shopify ecosystem circulates under one business factor, convenience. In a simpler term, Shopify’s all-in-one platform aggregates all the operations work together in a business-friendly way. With Shopify, it is super easy to start an online business with its built-in features, including payment processors, website builders, marketing campaigns, and affiliated social media advertisement campaigns. The same idea with Square, small enterprise owners do not have to worry about its payment logistics, as Square provides a wide range of services.

Such that the value of the ecosystem is greater than the sum of its constituent products, something like 1+1 = 3. In Square, its software services and hardware products supplement each other, and the small business owner chooses Square

Initially, the multi instantaneous development strategy is heavily criticized by the public market as Square’s exposure to so many sectors will diversify their attention and resources to focus on growth areas. From 2016 to 2020, their customer acquisition for its payment software de-accelerated year over year, however, churn rates have remained significantly low.

Source: Seeking Alpha

Strategy 3: Sales & Marketing

  1. Focus on customer acquisitions in the unbanked population geographic
  2. Target students/younger demographic
  3. Try different promotion strategies (against financial institutions)
Source: ARK Management

Dorsey targeted the geographic with a high FDIC rate, given Nigeria’s success in the mobile payment market. It is proven that unbanked populations are seeking an alternative way to manage finances instead of going through a financial institution. It eases payment distribution without sacrificing any features provided by a bank.

Square also targets tech-savvy younger demographics by sponsoring podcasts like Artificial Intelligence with Lex Fridman, the Joe Rogan Experience, and even e-sports teams.

Its promotion strategy is particularly interesting as well, instead of formulating what banks do, which are completing registration incentives and rewards and host local events. Cash App focuses on growing its social media presence with a promotion campaign #CashAppFriday, which is as simplistic as giving cash away every week, varying from $100 to $500.

Source: ARK Investment Management

Catalyst — Agility Over Everything

One of the benefits of operating a start-up is that the company is the structurally founded yet, which enabled them to take risks and have longer visions. In the midst of chaos and change, Square introduces direct deposit features applicable to stimulus payments, extends Square Capital loans, and increases #CashAppFriday giveaway prize pools to capitalize on the opportunity.

Jack Dorsey’s Future Goal

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