Careers at Square
Square’s mission is to make commerce easy.
In 2008 Twitter, which had been founded in 2006, was riding high, having experienced major growth. However, its Co-Founder and CEO Jack Dorsey was in a difficult spot. He was perceived as being a poor manager, with criticisms including hourly server crashes, limited communication with investors, and a focus on outside hobbies. He also did not get along with Evan Williams, a fellow Co-Founder.
In October 2008 the company’s management fired Dorsey, giving him a passive Chairman role. Unsure what to do next, he connected with old friend Jim Mckelvey, his first boss. Mckelvey was an artisan who sold glass artwork, and told Dorsey that he’d just lost a $2,000 sale because the customer did not have cash and he did not have a means of accepting credit card payments.
Dorsey thought it somewhat unbelievable that in the age of the smartphone, where consumers could walk around with mini-computers in their pockets, that many small business owners did not have an easy way to accept card payments. However, he did some research, and realized that the standard method of applying for a merchant account to be able to do so was difficult and expensive.
Sensing an opportunity, Dorsey decided to develop a technology that would enable anyone to accept card payments, anywhere. A prototype of a device was created (a card reader), and in 2009 a company was founded to market it – Square. The name was chosen because “square up” is an idiomatic term meaning to settle one’s debts, and also because the device was square-shaped.
In late 2009 Square completed the product, the Square Reader. Merchants could connect it to a tablet or smartphone and then swipe cards through it, using its software to accept payments. A pilot program was run for 10 months with 50,000 users, and it was officially unveiled in November 2010. Square was a huge success, enabling it to attract funding. The company went public in 2015.
Benefits at Square
Business model of Square
Square has a mass market business model, with no significant differentiation between customer segments. The company targets its offerings at firms of all industries and sizes.
Square offers seven primary value propositions: accessibility, price, convenience, customization, performance, risk reduction, and brand/status.
The company creates accessibility by enabling businesses of any size to easily accept card payments. The service is particularly beneficial for small firms and one-man shops. Clients can accept Visa, Discover, American Express, and MasterCard payments, as well as Android Pay, Apple Pay, EMV chip cards, and magstripe cards. Lastly, Square allows them to connect their existing service applications with its solution so they can sync price, item, and sales data.
The company offers a pricing value proposition. It offers its magnetic stripe card readers to businesses for free. Its charges for other readers but costs are low, and it provides bulk purchase discounts. Lastly, Square charges a single, low rate of 2.75% per card transaction -- compared to typical payment processors that charge multiple fees, such as authorization, chargeback, statement, gateway, batch, PCI compliance, return, non-qualified, business card, international card, and early termination fees. The company offers no long-term contracts, no set-up fees, and hidden fees.
The company offers convenience by making its offering easy to use. It only takes a few minutes for businesses to sign up and no credit checks are required. Clients can see how their business is doing across their locations on their mobile devices through a Dashboard with a real-time reporting feature. Also, they do not have to wait long for payment -- funds are usually deposited in a client’s bank account the following business day and can be deposited the same day for a 1% fee.
The company enables customization. Clients receive point-of-sale (POS) kits with guides that explain how to set up devices and software. The guides and kits are tailored by industry sub-sector (retail, food trucks, pop-up shops, salons/spas, bakeries/cafes, and bars/restaurants). Also, clients can use their Square data to develop custom apps.
The company has demosntrated strong performance through tangible results. It claims that clients that use its customer engagement tools for a given customer visit witness a spending rate on the next visit that is 20% higher than normal.
The company reduces risk by maintaining high satisfaction and security standards. It offers free 30-day returns for hardware purchases and a one-year limited warranty for Square Readers. It also encrypts transactions at the point-of-purchase, monitors money until it is deposited in the seller’s bank account, and ensures that all of its software and hardware follow PCI data security standards.
The company has established a powerful brand due to its success. Its clients processed $35.6 billion in 2015, representing 712 million card payments from 190 million cards. Also, approximately 50% of of independent businesses in the U.S. now have access to its Square Payroll solution.
Square’s main channels are its direct sales team and its website. The company promotes its offerings through its social media pages, search engine marketing, display advertising, radio and TV advertising, print media, direct mail campaigns, and trade shows and events.
Square’s customer relationship is primarily of a self-service nature. Clients utilize its products while having limited interaction with employees. The company’s website provides guides for their point-of-service kits that explain what to do in detail and enable rapid set-up. It also features a Support Center that includes articles, videos, and tips.
Despite this orientation, there is a personal assistance component in the form of phone, e-mail, and social media support. The company provides 24/7 support for larger businesses. There is also a community element in the form of a forum for clients.
Square’s business model entails designing and developing its software and hardware for clients.
Square utilizes third-party contract manufacturers for the production of its hardware products. The company also maintains the following types of partnerships:
Payment Process Partners - The various entities that facilitate the payment transactions process:
- Payment Service Providers (PSPs) – Facilitate payment transactions on behalf of the seller; the merchant of record for the transaction.
- Acquiring Processor - Provides the back-end technology that facilitates the flow of payment information through the Card Networks to the Issuing Bank.
- Card Networks – Provide the infrastructure for card payment information to flow from the Acquiring Bank to the Acquiring Processor.
- Issuing Bank - The financial institution that issues the Buyer’s payment card.
- Acquiring Bank - The financial institution associated with the Acquiring Processor.
General Partners - The company maintains the Square Partner Program, which includes the following partner types:
- Financial Institutions – Provide their members with Square’s business management solutions.
- Business Solution Providers – Bundle their services with Square’s to obtain more clients.
- Advisory Bodies – Introduce companies to Square through their associations/SMB services.
Program members receive sales and support services, educational materials, a co-branded website, and exclusive access to new offerings. Eligible partners also obtain compensation for deploying Square’s solutions for their clients. Specific partners include Navy Federal, Gravity Payments, AMTA, Nav, and LTPA.
Event Partners - Square partners with the organizers of various major events (e.g., sports events, festivals, concert tours) to provide vendors with its devices and train them on usage. Specific partners include Coachella, Stagecoach, Red Frog Events, Best Beverage Catering, NASCAR Sprint Cup Series, Canuck Place Children’s Hospice, Pride Toronto, C2MTL, and Alberta Beer Festivals.
Referral Partners - Square maintains the Free Processing Program, through which it invites clients to refer their acquaintances to join it. For each lead that activates an account through the referring client’s link, the client receives reimbursements on processing fees up to $1,000 in sales for the following 180 days (six months). Upon activation, the acquaintances will receive $1,000 in free processing, and clients‘ Square balances are credited with the transaction fee.
Square’s main resources are its human resources, who include the engineering employees that design and develop its software and hardware and the customer service employees that provide support.
As a startup it has relied heavily on funding from outside parties, raising $590.5 million from 39 investors as of March 2015.
Lastly, it places a high priority on its intellectual property, with 133 issued patents and 493 filed patent applications in the U.S. as of December 2015.
Square has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions.
Its biggest cost driver is cost of revenue, a fixed expense that includes transaction, software, and hardware costs. Other major drivers are in the areas of product development, sales/marketing, and administration, all fixed costs.
Square has two revenue streams:
- Product Revenues – Revenues generated from the sale of hardware products such as readers and software tools such as programs for employee and location management and payroll.
- Transaction Revenues – Revenues generated from fees charged for payment processing. Square charges 2.75% for each card transaction; however, if a client’s annual sales exceed $250,000 it works with the client to design a customized rate. Account for 94% of overall revenues.
info: Jack studied at the Missouri University of Science and Technology and New York University before dropping out. He previously served as a developer at Odeo. He is also the Co-Founder and CEO of Twitter.
info: Sarah earned an MBA at Stanford University Business School and an M.Eng., in Metallurgy, Economics, and Management at the University of Oxford. She previously served as Senior Vice President of Finance & Strategy at Salesforce.com.
info: Dana earned a B.A. in Comparative Literature and Economics at the University of California, Berkeley and a J.D. at Yale Law School. He previously led the antitrust and competition legal practice at Google.
info: Francoise earned an MBA at Harvard Business School and a Masters in Engineering at Institut Catholique d'Arts et Metiers. She previously served as Vice President of Business Operations at Google and as CEO of Ocean Gem Pearl Corporation.
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