Following IPOs from Lending Club and OnDeck last year, another FinTech company is set to go public in the coming weeks. Square, a payments company famous for their mobile card readers amongst other things, filed for their initial public offering earlier this month. While no date has been announced for their stock debut yet, the news has garnered a lot of attention.
Part of the reason Square’s IPO has been such a big talking point has less to do with the company itself and more to do with who their CEO is: Jack Dorsey. If you don’t know, Dorsey is also the CEO of a small social site called Twitter where he was recently brought on full time. One point that keeps coming up is how could Dorsey effectively run two publically traded companies at once? It’s a good question, but I’m more interested in others like: what brought Square to this point and what does their filing mean for FinTech?
More than Payments
Although Square, at its core, is a payments company, they have branded themselves as much more. Their best-known product is their small card readers that can be attached to smartphones or tablets in order to process credit cards. It’s a simple and genius idea (that companies like PayPal and Amazon have also sought to capitalize on) which has made Square popular among small business owners. VentureBeat recently highlighted the company’s strong reputation with these owners and how it has led to Square’s success.
“PayPal, QuickBooks, and Bank of America don’t think about small businesses like Square,” entrepreneur Tod Wilson told VentureBeat. As the article points out, Square not only gives small business owners the ability to accept credit cards but also acts almost as an operating system for such businesses. In fact, one restaurant owner said that they choose Square’s point of sale system over far more expensive options like Aloha and Micros. The restaurant owner also noted that Square has been very good about only releasing products when they’re 100% ready. While this seems like a no-brainer, it’s this attention to detail that has made the company an entrepreneur’s best friend.
Square has also expanded the scope of their offering for small businesses dramatically over the past couple of years. In 2014 they introduced Square Capital to give entrepreneurs cash advances, which are then paid back using a portion of their daily earnings. Most recently the company unveiled Square Payroll, which is currently only available to businesses in California. These moves have shown Square’s intent to be a one-stop solution for small businesses — something they’ve done very well so far.
The Bottom Line
Late last year, Forbes wrote a piece titled “15 FinTech Start-Ups to Watch in 2015.” Of Square, the article said, “One of the most disruptive startups in any field in recent years, Square did what every FinTech company aims to: provide a simple, tech-driven solution to a widespread problem.” Just as Lending Club was conceived after Renaud Laplanche looked at the discrepancy between what he was paying the bank to borrow money compared to what he was getting from his savings account, Dorsey and Jim McKelvey observed how much of hassle it is for businesses to accept credit cards — a form a payment that was quickly eclipsing cash — and decided to do something about it.
Payment processing is inherently unsexy — your average American is probably unaware that businesses even have to use them. However Square has made a name for itself not only with business owners but also with consumers. This is thanks in part to the company’s small business outreach, which has resulted in their reader being used at coffee houses, farmer’s markets, and even by clever Girl Scouts looking to sell more cookies. Square has far more name recognition going into the IPO than most FinTech companies, because of this their impending IPO is a big moment for the FinTech space. Keep an eye out for their public trading debut.