Could the convergence of Apple and Square be beneficial for both companies? From Steve Jobs’ successor to finally cracking the multi-billion dollar NFC industry, here are the reasons that I think Apple would be well advised to acquire Square as soon as possible.
A little bit about Square
First, here’s a quick overview of Square’s journey thus far, significant milestones, key members of the team and the general outlook and aspirations of the company.
Jack Dorsey, formally co-found of Twitter, foundered Square in early 2010. Square is an electronic payment system that uses a card reading device that is inserted into the headphone jack on an iPhone or iPad. Square allows anyone with an account to receive payments from credit cards. So far Square has seen huge uptake with small retailers. Square has completely revolutionised the small payment industry, killing point of sales and the complicated process of taking payment of goods and services for any type of business. Such is the success of Square, it was reported on May 21st 2011 that Square had now reached $3 million a day in payment processing.
Square is a design orientated service that takes pride in the elegant and gorgeous app and the design of it’s products and software. Square charges a fixed 2.75% per swipe and offers it’s users a clean and simple experience that is fast, safe and secure. It is this simplicity that has allowed everyone from taxi drivers to side street food vendors to adopt Square as their method of payment.
The ethos of Square is very much the vision of Dorsey. The very best in product design, ease of use and a system that just works. In this article from fastcodedesign.com it mentions Dorsey’s OCD like compulsion to “pixel-perfect” design.
In April 2011, Square received strategic investment from credit card industry giant Visa. Although with the current revenue figures that Square is processing each day, they do not need the money, the Visa investment clearly shows that the major credit card companies see Square as a major player in the future of payment processing. The Visa deal also gives Square a far wider reach and exposure to small businesses needing payment processing.
Also in April 2011, Apple announced that it would be supplying Square readers on it’s website and in it’s retails stores across America. The Apple deal was huge for Square in terms of further exposure and a better way of getting the hardware to the market. Although Square is not technically making money from selling the readers in Apple stores, the strategic partnership and the affiliation with a company like Apple is huge.
In May 2011, Dorsey launched Square Register and the Square Card Case further disrupting the current payments system. Square Register is “a high-powered point of sale replacement for cash registers and point of sale terminals”, whilst Square Card Case is “a way for purchases to access a local merchants’ goods, prices, location, loyalty cards and more”. By releasing these two new products, Square is introducing a whole new level of customer engagement and analytics for merchants, giving them in depth data regarding their product sales and customers.
“Once you’ve downloaded your mobile Card Case, you can fill your case with ‘cards’ of all the merchants you visit and buy from who accept Square. When you click on an individual merchant’s card, you’ll be able to see a map of where the merchant is located, contact information, your own order and purchase history, and receipts with the merchant and a daily live menu of items or services from the merchant. You’ll also be able to see what other customers are buying at the store, and merchants can serve customised offers to specific customers based on their purchase history”.
Customers can now also pay for goods or services without having to actually use their card. Once they have purchased from that Merchant before, they can simply order from their iPhone and the Merchant will receive and approve the payment, cutting waiting times and the hassle of shopping.
Square latest products have taken even more friction away from the payments processing service whilst adding a huge range of new intelligence, customer engagement, marketing and analytics for Merchants. Square is quickly becoming the de facto payment processing system for businesses that require a simple, easy to set up, but powerful solution.
Why would Apple acquire Square?
The acquisition of Square by Apple makes sense for a number of reasons. For one, Apple has recently aligned itself with Twitter, another product of Dorsey’s. The clean and simple Twitter platform has made it an obvious choice for Apple to start using an online communication service. Twitter will receive a huge boost from Apple’s integration with their single sign on, as well as built in Twitter functionality in various iOS apps.
Square is one of the best uses of the iPhone and the iPad
A great deal of the value of the iPhone and the iPad is the applications that are created by developers. Imagine the App Store without apps! It makes sense for Apple to continue to drive innovation with the very best applications and services that utilise their hardware. Imagine in years to come, the value proposition for Apple offering their iOS range with built in Square technology for enterprise clients. Square adds huge value to the future of Apple, there is no doubt.
Square is already generating huge revenues
Apple is no new comer to acquiring smaller companies for either their technology or their talent. The difference with Square however, is that Square is already processing millions of dollars a day in the US alone. Acquiring Square is not a gamble, it is a value investment to be the number one payment processor in the world.
Square fits perfectly with the Apple ethos of “it just works”
There isn’t a company in the world that fits better with Apple than Square. Square has been built around a number of key areas, namely “pixel-perfect” design, a simple, yet powerful solution and a system that “just works”. Square’s hardware is clean and minimally designed, whilst their software is some of the best designed software in the App Store, Apple themselves would be proud. In fact, if you didn’t know, you would already think that Square was a division of Apple.
The future of NFC payment processing is huge
NFC (Near Field Communication) is not a new technology. In fact Google’s Android has had the technology baked into their OS since FroYo. Google also recently announced Google Wallet, an open payment processing system built upon NFC technology. Interestingly Google also announced they will partner with Apple, WP7 and RIM so that they can use Google Wallet technology, however it is extremely unlikely that Apple will take Google up on that offer. Apple are well known for wanting to have complete control of every aspect of their hardware and software. Also, with Apple’s current revenue model (30% cut from App store and iTunes purchases) Apple would be losing out on billions of dollars of revenue by not using their own solution.
The payment processing industry is a multi-billion dollar industry and Apple will want to be the number one player. The purchase of Square is a significant step towards dominating the NFC payment industry by acquiring an already proven and quickly growing company.
Jack Dorsey as Steve Jobs’ successor
Steve Jobs has been crucial to the resurrection to complete dominance that Apple has shown across many industries over the last couple of years. Jobs’ pulled Apple back from the brink by re-introducing his methods of quality control, precision design and simple, intuitive products that consumers want. Apple is now dominating in the mobile phone, laptop, tablet, music industries and is set to eclipse competitors in other industries they have entered.
Jack Dorsey is a product genius. It was Dorsey’s vision for Twitter as a communication platform that has revolutionised the web in 140 characters. Dorsey shows incredible level of detail and aspirations for the products he creates, which fits perfectly with Jobs’ product design mantra. Dorsey has also successfully launched and lead two of the Internet’s most highly valuable properties already, as well as a prolific history in technology and creating innovative products. I believe that Dorsey is the perfect successor for Jobs to push Apple to constantly innovate and create the highest quality products and services in the future.
So how much would Square cost?
Square recently announced they were raising $50 million in investments that would value the company at over $1 billion. Square is also announcing new processing records every couple of weeks and the release of new technology that is further innovating the highly profitable payment processing industry is quickly pushing up that company valuation.
With Apple sitting on their huge war chest of cash reserves, $3+ billion for Square would be a drop in the ocean. I think it would be unwise for Apple to try and create a competing product to Square. Square is already the perfect Apple product, and any attempt to try and persuade Merchants to use a competing product would not go down well. Apple have already affiliated themselves with Square, and so the acquisition would make logical sense. The acquisition would also bring some of the best designers and engineers in the world to Apple, and of course it would bring Jack Dorsey and Jim McKelvey into the company.