Question

Case Study Square: Wireless Payments to an iPhone, Android, or iPad Square is a little device that magically transforms a smart phone into a credit/debit card machine. It’s changing the game for electronic payments and the way we traditionally send and receive money. Square allows you to buy, sell, and send money by using any Apple or Android mobile device. With three free mobile apps—Square Register, Square Wallet, and Square Cash—Square is designed to help small businesses and sole proprietorships accept credit card payments and help consumers transition to a cashless lifestyle. Here is how Square works:

■ Request your free reader: Sign up and Square will send you a free Square Reader to take payments on an iPhone, iPad, or Android. Activate your account and process payments in minutes.

■ Download Square Register: Square Register is a free app that works with Square Reader to turn a smart phone or iPad into a mobile point of sale. Payments, sales reports, and hardware— Register does all this and more.

■ Go places. Sell things: Plug in Square Reader, sign in to Square Register, and start swiping. Send receipts via email or text message. Request more free Square Readers so staff can sell for your business too.

Square is amazing technology, but the question you have to ask is whether Square is really changing how we process payments. If you own a small business and could traditionally only accept cash, then the answer is yes! Just think of the farmer’s markets, street fair vendors, or flea market. Unfortunately, small business does not always equate to large profits. These types of customers are low volume and minimal transactions, which equate to low profits for a payment processor like Square, which makes its money by taking 2.75 percent of the total purchase. If you purchase $100 worth of t-shirts at the local street fair with your Visa card, Square collects $2.75 and has to pay Visa $2.20, making a mere $0.55. Square has to run its business on these profits, including expenses for marketing, sales, customer service, employees, accounting, and so on. For a viable business, Square needs to scale its way to massive payment volumes, and with PayPal and Intuit quickly building card readers of their own, the competition is growing.

Questions

1. Would you categorize Square as a disruptive technology?

2. How is Square using wireless networks to gain a competitive advantage?

3. What can Square do to maintain its competitive advantage and become more profitable?

4. If you were given $1 million dollars to invest in Square, would you do it?

Answer 1