Visa Makes A Strategic Investment In Disruptive Mobile Payments Startup Square | Hacker News Reader

Visa Makes A Strategic Investment In Disruptive Mobile Payments Startup Square

techcrunch.com

77 pointsStraubiz31 comments

Sorry to be pedantic, but I think half the buzzwords in the title are quite unnecessary.

All of the buzzwords are unnecessary.

"VISA invests in Square" tells me everything I need to know. I can tell Visa's strategy from the title. The investment actually makes me doubt Square is disruptive, but throwing a buzzword in there won't change my mind about it.

The "mobile payments" part helps, since otherwise I'm unfamiliar with Square, but I agree that the opinion words are unnecessary.

Square isn't disruptive to VISA. It's disruptive to credit card processors (i.e. Authorize.net).

Yes, that is true as it grows. However, I thought that Square planned to make their systems ubiquitous and use that leverage to lower fees and pressure Visa to make changes to merchant guidelines and offerings that benefit Square's goals. Yes, this is speculation as I'm not involved, but Jack Dorsey has an expansive mind and the fact that his ambitions for Twitter included its current role in exacerbating political revolutions suggests he wants Square to have similar power in business.

Perhaps VISA is willing to take a smaller cut so long as the total number of credit card transactions that flow through them increases quickly enough.

The goal of a disruptive technology is to force the establishment to take smaller cuts to avoid losing market share, not to get them to agree to a fair exchange.

But how is 'more ubiquitous credit card processing' going to eat market share away from credit card companies unless Square starts issuing its own credit cards? At some point the gambit would have to be "I'm going to drop VISA and start issuing my own credit cards... or VISA can just take a smaller cut." That doesn't seem likely.

I see it going down in three ways.

First, Square might avoid needing a traditional credit card with their products somehow. I realize mobile payments and other methods have been tried before but eventually it's going to work. This would have the effect that Craigslist and Ebay had on newspaper classifieds by reducing the market for VISA's products for banks and merchants.

Second, Square can definitely compete in the cardspace. What's impossible for them now could change with a big enough operation.

Third, Square can use their ubiquitousness to lower fee structure as has been said. That will reduce market share of the fees in the payments 'stack' only; VISA/MC will still exist everywhere. I think this will be necessary for them because their biggest competitor right now is cash, because they want to do every financial transaction in the world.

Since all of these 'disruptions' would probably boost the other I predict a combination from them from the company that gets as big as Square wants to be.

Visa also now own authorize.net. They acquired them around the start of this year I think.

It also says something that I immediately knew who wrote the article before even clicking through.

Not only that, but they've used this same buzz word formula in almost the same exact context something like a week ago, except it was about Apple carrying Square readers in their stores.

Edit: http://techcrunch.com/2011/04/16/square-apple/

As much as I'm annoyed to be spreading links to this sensationalist stuff.

While I am over the moon for Square and the investment from such a giant in the market, it is also one of those things which irks me. As if Google were to invest in DuckDuckGo, or something like that. Would this investment (Visa in Square) affect or turn the direction Square is heading?

Obviously Visa is a powerful friend to have in your corner, and financially wonderful as it likely further improves Square's rates for processing Visa cards, etc.

Maybe I'm being overly sensitive since they are not direct competitors, I think perhaps my concern is that it seems that Square could have been and this investment makes that path a bit more politically difficult.

I think this would be much closer to Google investing in Mozilla (pre-chrome).

My understanding is that Visa makes most of their money on credit card processing fees. Square is extra infrastructure that strengthens the use of credit cards. Particularly in a market that was mostly untouched before.

Low end mobile payments where limited to cash before. With Square visa is part of the game.

Square is generating incremental revenue for Visa. Visa can now earn a 1% fee from my purchases at the local farmer's market. Prior to Square, that simply wasn't possible. Visa wants to endorse the business model, but rather than just saying "we support this", they instead give Square a $1 "strategic investment". That is their endorsement, and they hope it helps Square grow faster. The faster Square grows, the sooner Visa gets it's 1% from transactions that have historically been cash only.

I don't really understand how this can be viewed as a mistake by either party. Sure, it pisses off Intuit and other Square competitors, but Visa has a monopoly, and doesn't have to give a shit. Visa's growth opportunity is replacing existing cash transactions, and their risk is financial regulations that cram down interchange fees. The business strategy for Visa should be endorsing Square for growth, and hiring the best lobbyists to keep prices high.

This, coming after VeriFone's FUD, is fantastic. I can't imagine how happy the Square people are right now, they've just about guaranteed their success.

Anyone else feel that the reliance on a credit card on hand is just a stepping stone in Dorsey's eventual vision?

crosspost:

This is a very good, and to me a very surpising move by Visa. Instead of ignoring innovation (like brick&mortar bookstores and cable companies did), they embrace it. Something I definitely didn't expect from a corporate mogul like Visa.

Bookstores and Cable companies don't have the same relationship with "innovation" as Square and Visa. Square is replacing cash payments with credit card payments, thus enhancing Visa business.

If you started a web video company that increased cable company revenue, I am sure the cable companies would endorse you as well.

The cable companies, bookstores, and visa, are all behaving rationally. There is nothing unexpected.

Interesting application. But it begs the question : how comfortable would you be handing over your credit card to a small business like a hot dog stand or a farmer's market vendor ? My credit card was "cloned" once and since then I never use my credit card with small shops and restaurants.

Will this service ever take off when there is a perfectly good substitute -- petty cash ? The bigger shops already have a cash register.

> But it begs the question : how comfortable would you be handing over your credit card to a small business like a hot dog stand or a farmer's market vendor ?

More - I see the same folks at my farmer's market every weekend. I know their names, where their farm is, etc. If they clone my card, I'm going to go punch them in the face.

how comfortable would you be handing over your credit card to a small business like a hot dog stand or a farmer's market vendor

You don't need to speculate. Go down to your local farmer's market and see how many vendors are using Square. This week I've paid for coffee and a burrito with it. And I live in Phoenix, not San Francisco.

Are you unaware that all major credit cards offer no-questions-asked fraud protection? That were someone to fraudulently impersonate Square to steal your credit card info that you could simply reject the charges and get a new card?

Will this service ever take off when there is a perfectly good substitute -- petty cash

Petty cash and credit cards have drastically different properties:

* Petty cash is only obtainable at specific locations (ATMs, banks). Credit is instantly available at nearly all payment locations.

* Petty cash offers no fraud protection. If someone steals it, it's gone. If someone sells you something under false pretenses, you have no redress.

* Obtaining and transporting large amounts of cash for a large purchase (a nice couch, for example) is time consuming and dangerous.

What do you mean by "perfectly good substitute"? I can't think of any way to parse that phrase that makes sense in this context.

Maybe I am not in the right demographic category to appreciate this. I like using cash for small purchases. I like the anonymity, the convenience and easy availability ( I typically carry some in my wallet). Most of all , I would not feel comfortable handing out my card to small shops or vendors that I hardly ever visit. For large purchases, like the couch example, most such stores already have cash registers that support Credit cards. I don't see them as using this service.

Please note that I am not saying this is a bad idea. I am saying that it is positioned as an alternative to small cash transactions for small businesses. That would be hard to beat.

> Most of all , I would not feel comfortable handing out my card to small shops or vendors that I hardly ever visit.

Why? Fraud protection is the same, and smaller vendors are more worried about their reputation in the community than, say, Target or Best Buy.

Congrats! (I'm an investor in Square)

Does anyone else find this ridiculous?

"And on Square’s homepage, the company depicts a user swiping a credit card on Square’s mobile reader using a Visa Signature card. It is telling that Square chose to feature Visa, when the reader accepts MasterCard, American Express and Discover, which are all widely used across the globe."

Ridiculous in what sense? That it probably has nothing to do with it?

Yeah, this is likely. However looking at said picture (https://squareup.com/) I wouldn't say that there was necessarily something to it, but at least it's somewhat odd to use a card that is clearly a VISA from Chase. It wouldn't be very complicated to design an image that is clearly a credit card without putting other companies' logos.

Eh, it's not really any more suspicious than depicting somebody using Windows rather than mocking up a generic OS. Visa is the most common credit card and Chase is the most common credit card issuer in the US. It could hardly be more ordinary.

Don't get me wrong, I'm not saying it's suspicious. What I mean is that, had it been me in, I would have probably picked a "no name" representation of a credit card.

No. The home page very clearly shows the VISA logo (though it's inverted, it's trivial to read). They could have chosen a generic credit card depiction (a credit card without identifiable marks), they went with visa.

I don't think the guy is reaching much here.

So, Visa didn't believe the VeriFone video?

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