Author(s): Raghu Gopal
This week, Square, a US mobile payment services company, announced it will roll out its solutions in the UK. The move marks its biggest international expansion and it's a push to boost growth as the US market nears saturation.
The news was announced at an event with Square CEO Jack Dorsey — also the CEO of Twitter — in London's Soho Piano Bar, one of the company's first customers in the city.
Square is mostly known for lowering the entry barriers for small businesses to take card payments by morphing a phone or tablet app that works with a small accessory, made and sold by Square, to transform those consumer devices into card readers and processors. The company marketed this solution specifically to small companies that couldn't accept card payments previously using traditional point-of-sale equipment.
Square was founded in the US in 2009 and has since expanded to Canada, Japan and Australia.
The UK is one of the world's largest economies and has a high concentration of small and medium businesses — Square's target customers. Still, the company had to wait to enter this market until it designed a terminal that could accept payments from contactless and chip-and-pin cards, which are the standard in the UK.
The company still generates most of its revenue from processing payments, but Square has expanded into other businesses including loans, food delivery and software services that enable customers to manage inventory and analyse sales. Square is betting that its all-in-one offering will allow it to take market share away from rivals and attract merchants that don't want to stitch together their own ecosystem of banks and terminals to build up a payment system. PayPal, iZettle and SumUp are some of the companies that compete with Square in this market.
With less than 5 percent of Square's current sales being international, the UK should represent a great market for expansion. The challenge will be to stand out from the numerous established payment solutions available in the UK. If successful, Square's launch in the UK could bring Square to its next step — continental Europe. Despite the fact that Brexit proceedings have started, the UK is still an EU member with EU-compatible legislation, and we believe it will provide valuable lessons to Square. Adoption of payment cards varies largely across Europe, representing different opportunities for Square in its path to disrupt and modernise retail payment systems.