Square, the mobile paymets solution founded by Twitter co-founder Jack Dorsey, has today raised a further $100 million in a Series C funding round led by Kleiner Perkins Caufield, apparently valuing the company at $1 Billion.
Square was the first product on the market that tried to bridge the gap between taking mobile payments via smartphones, and the reliance on debit and credit cards for payment in the Western World. Square provides a plugin to iPhones and Android phones that fits in the headphone socket and reads the magnetic strip on the ubiquitous debit and credit cards and through an easy to use app provides a payment solution taking a flat 2.75% cut of any transaction. It’s an elegant solution in the US where it has gained traction in the marketplace (and in actual markets), and has since been joined with competitors such as that from VeriFone, Sage, and GoPayment amongst others.
I can’t help thinking, however, that Square is a very short-term solution. Firstly it relies on the magnetic strip on debit and credit cards – something which Europe is moving away from and towards the more secure Chip and PIN (EMV) solution. Yes European cards also provide a magnetic strip, but I can’t remember the last time I used it – and it is likely that the rest of the world has already or will follow the European example as it reduces fraud at the till.
Additionally, there is an increasing drive towards both NFC payments and over the air mobile payments from various sectors. Whilst it is true that as yet all of these initiatives have failed and people still rely on their cards for payment – as people start to realise the power of the computer in their pocket it should only be a matter of the right product coming to market before the public embraces it en masse.
Square is not only relying on cards for payment which people may move away from over the coming years, but they are relying on the magnetic strips on those cards which is a slowly dying technology. It is an elegant solution to the current marketplace – to me it seems like plastering over a problem whilst other technologies try and improve and make progress around it.