Description of the company
The revolutionizing idea of Square was unveiled in December 2009 by one of its founders and also co founder of twitter, Jack Dorsey. Square intended to bring a solution to a problem that many small businesses face with accepting credit card payments.
After assessing the mobile money market, it became apparent that the number of people owning a smart phone was increasing every year and hence mobile payments was also expected to increase.
Due to expensiveness, complexity and lack of transparency of credit cards, many micro businesses and ordinary people declined doing transactions using credit cards; and this was the problem that square had in mind to solve. Square has consequently eliminated some of the charges that were uncomfortable with small businesses owners and ordinary people.
For instance, before the rolling out of Square, a device for swiping a credit card would cost around 900 dollars, however people do not have to meet this cost anymore since Square is not charging for its swiping hardware. In addition, it is offering no fixed cost, and no credit checks.
Already the company is valued at almost 1billion dollars and appealing to so many people who want an alternative means of payment from the old checkbooks and credit cards systems.
It processes around 2 million dollar worth of transactions on weekly basis. With the growth of mobile money market and increase in the number of people who want alternative payment methods, this weekly transaction figure is expected to explode. However the company is only operating in North America and hoping to open its payment system beyond these boarders in 2012.
Problem definition
How well is square able to deal with the competitive mobile payment market after their delayed roll out and the emergence of a different alternative solution from their key competitors?
Analysis of possible solutions to the problem
The problem that square faces can be simplified to rivalry. Ever since the company announced of its intention to create a solution to the problem witnessed with the old payment system there has been the threat of potential entrants including Google, PayPal, and Apple.
When the company started and rolled out its piloting program to test its product, it did not anticipate that there would be problems dealing with issues of hardware availability and handling the magnitude of the transaction that its clients would process on daily basis. Because of this, the company realized that it has to go back to its drawing board and re-strategize in order to overcome the challenge.
The manner in which it responded to the issue was a good thing since it had to ensure that their product really satisfy the needs of its users instead of presented a product not fully baked. Even though there was an underestimation of the market, the move to rectify the problem was prudent and risky at the same time since it was going to create trust and a lasting solution to the old payment system problem.
The risk however comes in because it gave its big player competitors a chance to roll out their alternative payment system that uses a different technology from the one Square uses. The reason why the delay move was prudent is because it dealt with the issue of fraud and insecurity in mobile payment which was a common thing with the old payment system.
Mobile payment market in the US is a by now a fast growing market with a huge percentage of the young generation being comfortable to use it. So far check books and cash are almost outdated despite the fact that they are common with the old generation, late 30s and above. The federal government also stated that virtually all of its paper-check offices are closed due to the huge decline in demand. Several other big stores do not accept checks as a means of payment.
This can be translated that electronic systems of payments including mobile phone payments methods have a bright future in the US and in similar markets. This therefore means that Square has a potential to remain relevant in the market even with the presence of its main competitors.
However it now has to deal with its rivals since they are increasing and each of them has a different alternative method to tackle the mess of the old electronic payment system.
In as much as it can rest assured that there is a growth prospect in the mobile payment market, it has to come up with a strategy that will consolidate its position in the market since new entrants shall always be a threat in a growing industry.
At the same time, Square needs to establish loyalty in its new clients in addition to its already existing clients. So many of its target market segments are still eager to try out the product and there is need to ensure that these clients remain loyal to the company.
The PayPal technology is one that lets users who are in proximity, transact money between their PayPal accounts using their smart phones. It also allows users to deposit a check into their accounts by taking a photo of both the front and the back side of a check. Google and Apple, who are the other two main rivals of Square, use the NFC technology.
All these technologies are different from the technology behind Square which uses a card reader device that is plugged into smart phones. Since credit cards are not going to be faced out and they are here to stay, then the technology of square will ensure that businesses both micro and macro businesses continue accepting credit cards.
This is because the square devices will reduce the messes and distrust in credit cards that was witnessed before. Regarding the issue of availability, NFC technology is less available because of its complexity in setting up the system. This is an advantage that square can make use of to increase its presence in the market and establish its position in the market taking a big share.
Conclusion
For the next few months, square needs to establish its identity as a brand in the market. It needs to have a strong marketing strategy that will ensure customers prefer it to its main competitor. Since it is very hard for customers to migrate to a different service provider once they feel comfortable with their present one, they would have established loyalty from its users.
This is because people will have to make investment in order to switch to a different service provider who offers the same thing that square offers. Finally, since the product has differentiation from its rivals’ products, the best thing is to ensure that its performance is always better that the performance of the others.
Work Cited
Andrews, Robert J. Credit Card processing and money transfer in the US. New York: IBIS World Industry report #52232, 2011.