Square, Inc.

Creation

The original inspiration for Square occurred to Jack Dorsey in 2009 when Jim McKelvey (a St. Louis friend of Dorsey at the time) was unable to complete a $2,000 sale of his glass faucets and fittings because he could not accept credit cards.

The name "Square" refers to Square's card readers, which are square in shape. The name also refers to the idiomatic term for settling debts: "squaring up." Several other names for the company were considered, including squirrel, stash, and wallet. The name Squirrel was used during a meeting the company had with Apple's Scott Forstall, SVP of iPhone Software, wherein Dorsey saw that the Apple cafe's point-of-sale system was provided by a company called "Squirrel Systems," and decided to change the name.

Square Reader

The Square Reader was the first product released by Square, and is used to accept credit card payments by connecting to a mobile device's audio jack. Square's original reader consisted of a simple read head directly wired to a 3.5 mm audio jack, through which unencrypted, analogue card information was fed to smartphones for amplification and digitization. Square's technology is Payment Card Industry Data Security Standard (PCI) compliant and Verisign certified.

In April 2011, rival payment company Verifone claimed that the Square system at the time was insecure, and that a "reasonably-skilled" programmer could write a replacement app which could conceivably use the Square device to skim a credit card and return its details, because the first-generation Square Reader did not encrypt track data in hardware. VeriFone posted a demonstration video and sample skimming app to its web site. Dorsey called VeriFone's claims "neither fair nor accurate", noted that the card data could be gathered visually from the card, and said that the claims ignored the fraud protection provided by card issuers.

Square now uses strong encryption on its devices, including SSL and PGP. Its cryptographic keys are at least 2048 bits in length. Card numbers, magnetic stripe data, or security codes are not stored on Square client devices. Square follows the guidelines issued by OWASP.

In July 2014, Square announced a card reader that would accept chip cards and contactless cards, ahead of the October 2015 EMV liability shift. This new reader supports chip-and-signature and contactless transactions, and the standard Square Reader is also provided in order to support traditional magnetic stripe card transactions.

In June 2015 at the Apple Worldwide Developers Conference, Apple announced Square will release a new Square Reader capable of accepting Apple Pay and other contactless payments. The reader will also be able to accept EMV chip cards.

Square Stand

In June 2013, Square unveiled Square Stand at a press event at Blue Bottle coffee in San Francisco. Square Stand aims to turn the Apple iPad into a more complete point of sale system. It makes use of a larger reader and a rotatable base that allows the stand to be swiveled around. Square Stand took more than a year to develop and the team of around 15 was led by Jesse Dorogusker, a former Apple director of engineering for iPhone, iPod, and iPad accessories at Apple. The Square Stand works with iPad 2, iPad 3rd generation (30-pin connector), and iPad Air (lightning).

Square Register

Square Register is point of sale software aimed at replacing traditional credit card terminals and cash registers. Square Register combines payment processing with point-of-sale functionality like itemization and inventory management, and integrates with third-party platforms such as Shopventory, Weebly, and Bigcommerce via an App Marketplace.

Square Cash

Square Cash allows person-to-person money transfer via the Square Cash app or e-mail. In March 2015, Square introduced Square Cash for businesses, which includes the ability for individuals, organizations, and business owners to use a unique username to send and receive money, known as a $cashtag.

Square Capital

In May 2014, Square launched Square Capital, which offers business financing to merchants using Square. In contrast with a traditional loan, there is no time limit for a merchant to pay off a Square Capital cash advance. The merchant returns the advance to Square by paying back a percentage of their credit card sales over time.

Caviar

On August 4, 2014, Square announced the acquisition of Caviar, a startup that delivers meals from high-end restaurants. Caviar uses a fleet of couriers to provide delivery for popular restaurants who do not otherwise deliver. Caviar is currently available in 18 markets in the U.S. Users can order via the company's iOS or Android app, or on Caviar's website.

Caviar eventually replaced Square Order, an app which allowed users to make purchases in advance and pick them up at a predetermined time. In March 2015, Square announced that it was shutting down Square Order to focus on other efforts.

Customer Engagement

In April 2015, Square launched Customer Engagement, a suite of CRM tools which includes email marketing services. These tools allow businesses to target customer audiences with customized or different messages and promotions based on actual (offline) purchase behavior.

Square Payroll

In June 2015, Square launched Square Payroll, a tool for small business owners to process payroll for their employees. The product, currently available in Alaska, California, Nevada, South Dakota, Tennessee, Texas, Florida and New Hampshire, automatically handles a business' withholdings, payroll payments, and tax filings.

Software Products

Payments, Point of Sale, Dashboard, Analytics, Deposits, Invoices, Gift Cards, E-commerce, Appointments, Payroll, Employee Management, Location Management, Inventory, Customer Engagement, App Marketplace, Developer APIs, Capital, Caviar, Cash,

Hardware Products

Contactless + Chip Reader Magstripe Reader Stand

Financials

Square received angel investments from Marissa Mayer, Kevin Rose, Biz Stone, Dennis Crowley, Shawn Fanning, MC Hammer, and Esther Dyson. Since then, it has raised several additional rounds of funding:

The company's valuation in October 2014 was $6 billion.

On November 19, 2015, Square had its IPO on the New York Stock Exchange with an initial valuation of $2.9 billion, down by more than half from its last valuation in October 2014 at $6 billion. Although the firm has yet to make a profit and has lost $420 million since 2012, it has decreased its losses from 44% of revenues to 16% in the 6 months leading up to its IPO.

Operations

Square was co-founded by Twitter creator Jack Dorsey. Dorsey also serves as chief executive officer and Sarah Friar serves as chief financial officer.

Square's office is located on Market Street in San Francisco. Square has more than 1000 employees.

Square has been available in the United States since 2010 and became international when the company launched in Canada at the end of 2012. In May 2013, Square announced that its mobile payments service was available in Japan after agreeing to a partnership with Sumitomo Mitsui Card Corporation. The fee for transactions would be 3.25% in Japan.

Square's Board of Directors includes Dorsey, McKelvey, Roelof Botha, Vinod Khosla, Mary Meeker, former US Treasury Secretary and Harvard University President Lawrence Summers, former CFO of Goldman Sachs David Viniar, and businessman and NBA hall-of-famer Earvin "Magic" Johnson.

Business model

As of March 2013, Square provides its magnetic stripe card readers to users for free. Square charges $99 for Square Stand and $29 for its chip-based Square Reader. The Square app is also freely downloadable from the App Store and the Google Play Store.

Square charges a fee of 2.75% on every credit card transaction. Square does not have any additional fees beyond the 2.75% per swipe (or the 3.50% plus $0.15 cost per manually-entered transaction) and there are no monthly fees or set-up costs. Square claims that its costs are, on average, lower than the costs charged by the conventional credit card processors. Square is regarded as a useful app for entrepreneurs, including, for example, consultants, food truck operators, and traditional retailers. Swiped payments are deposited directly into a user's bank account within 1 or 2 business days. In some instances, Square may withhold payments to its users pending issues related to chargebacks.

Square also generates revenue from selling other services to businesses, including subscription-based products such as Customer Engagement, Square Payroll, and Square Register. For example, with Square Payroll, Square charges sellers a monthly fee of $20 and $5 for each employee paid.

Growth

At the TechCrunch Disrupt conference in May 2011, Square announced the release of two new apps, Square Card Case (later rebranded as Square Wallet) and Square Register. Square Wallet, before it was removed from the Apple App Store and Google Play Store in 2014, allowed customers to set up a tab and pay for their order by providing their name (or a barcode) using a stored credit, debit, or gift card.

In August 2012, Starbucks announced it would use Square to process transactions with customers who pay via debit or credit card. In February 2014, Whole Foods Market announced it would use Square Register in select stores' sandwich counters, pizzerias and coffee, juice, wine and beer bars.

In July 2013, Square launched Square Market, which allows sellers to create a free online storefront with online payment processing functionality. In March 2014, Square announced it will start allowing sellers to accept bitcoin on their own storefronts through Square Market. The seller will take no risk on bitcoin value fluctuations.

In August 2014, Square secured an investment from Victory Park Capital, an asset management firm, to extend "hundreds of millions of dollars" to small businesses via Square Capital. In May 2015, Square secured additional outside investments for Square Capital, with Victory Park Capital tripling its initial investment. In its 2016 third quarter earnings report, Square reported that it had loaned $1 billion to companies through Square Capital since the program's inception. In October 2015, Square Inc. filed an IPO to be listed on the New York Stock Exchange. Shares were priced at $9 on November 18, 2015, and on November 19, 2015 Square officially began trading.

In the media

Business Insider praised the product for its "ease of use, simplicity and elegance". Business Insider favorably compared Jack Dorsey with Steve Jobs for what they call his "entrepreneurial vision and charisma". The Next Web praised Square's website squareup.com for its design and aesthetic appeal. The product was also showcased at Apple's iPad 2 event. GigaOM called the product a disruptive innovation.

Customer feedback

Most complaints emerge from an unsatisfying customer support. The main reason for inquiries originate from suspended accounts with money on the hold due to alleged illegal business which infringes against Square's terms. The website cardpaymentoptions.com states that "[t]he majority of the complaints fall into three areas: virtually nonexistent phone support, misunderstanding and nondisclosure of its former $2,002 card-not-present deposit hold policy, and reports of random fund holding or account deactivation exceeding 30 days with no explanation or communication from Square."

Banned transactions

In May 2013, Square announced it would no longer allow firearms-related transactions to be performed using its devices or software. The company amended the terms of service for retailers to ban sales of "firearms, firearm parts or hardware, and ammunition; or ... weapons and other devices designed to cause physical injury". The company denied that this move was related to the increased debate over gun control.