What does Visa want with Square?

Why would the name of the established credit card processing industry want to help out the vanguard of changing times?  Twitter-founder Jack Dorsey's company, Square, which came onto the credit card processing scene in 2009 with its controversial mobile processor for iOS, received an undisclosed amount of money recently from industry staple Visa.  Square, of course, processes largely Visa cards (Visa has around 40% of the credit card market in the US, and more of the debit market), so it is reasonable for Visa to want to be involved.

But many of the businesses in the industry other than Visa itself have been outright hostile to Square.  Do they fear being outdone by Dorsey's start-up?  And is Visa's strategic bet an indication that the key company in the industry thinks they're right to be afraid?

That may be part of it.  The card industry needs to change fast to keep up with rapidly advancing technology, and is doing so.  We here at Priority Payments Northwest have to (and love to) spend time every week researching new advancements so that we can stay ahead of the curve.

However, Visa may also be looking to find ways to get Dorsey to play a bit more nicely with others.  Square complements the current processing market, it doesn't replace it.  It fills in a hole where there used to be one with regards to peer-to-peer transactions.  It's cost effective for small transactions between friends and very small businesses, but can get pretty expensive when dealing with large numbers.  And as all business owners know, numbers get large very fast, often even before you make a profit!

Visa's investment is undoubtedly a vote of confidence in Square, and an attempt to get in on the new market that Square's product opens up.  It's also an act that brings Square further into the fold, and incorporates Square into the existing structure of credit card processing in the US.  Visa's still in charge.

 Matthew Koren is the President of Priority Payments Northwest, a credit card processor and payroll service provider located in Portland, OR. He runs his company, as well as partnering with a consulting practice: Causeit, Inc. You can contact him by filling out the Contact Us page, or by calling 866-402-1485, ext 750.