Innovations in Payment Systems

Square was started by Jack Dorsey in December 2009. It is a company that allows payments for work using smart phones to clients (Romo). The clients use the readers provided by the company to process payments on a mobile platform. However, the payment industry has seen increasing competition from other entrants like Google and PayPal (Bradley; Johnson; and Elmer-DeWitt). Consequently, square needs to leverage on its competitive advantages and improve client satisfaction in order to keep the momentum that was experienced when it came into operation.

There are numerous considerations that need to be made in answering the question how Square Company is positioned to meet its clients’ needs in the next two years. To begin with, we must look into the company’s capabilities at the moment by analyzing the clients’ responses. Moreover, we must also delve deeper into intricacies such as the hardware and regulatory concerns like credit limits, overall efficacy of the company, past tendencies and plans of the company. All these will be succinctly detailed in the discussions below.

Square used a number of means to predict the hardware and the credit challenges which hit the company six months into its operation. Remarkably, information from the clients provided the best company’s performance indicator to enable the company to test its services. Below is a succinct explication of how this was done.

  • Customer feedback was used to assess customer satisfaction. According to Siegler, Jack and the Square board noticed that the customers were unhappy with the credit limits that the company was offering at the time. This was through email exchanges and other communication materials that the company used to engage the customers (Square’s Official Website).
  • Expert analysis from industry players also helps to give a direct and relevant opinion on the product capabilities. In an article by Johnson, it is reported that the Square Company’s update acknowledged what many payments analysts said about Square’s plans since it burst into the scene last year. The payment analysts said that the company failed to take into account the complexities of the payments industry. According to Johnson, Aaron McPherson, a practice director with research firm IDC Financial Insights, said that Square totally underestimated the payment market.
  • Experience in the online payments industry has shown that the major challenge that these companies face is the credit card fraud—which is normally done by people who have noticed flaws in the security systems that the company has employed (Pontin). This can give a good basis for establishing elaborate security systems by giving the most secure payment system (Bradley).
  • Industry research helps to know the customer needs and building systems that take their considerations into account. Research puts the consumer or the client as the basis for determining production needs and their advice is very vital in determining the product design. Research also helps in getting the latest technological advancements to enhance usability and satisfaction of Square’s products and services (Pontin).

The Square Company worked relentlessly to address the challenges that the company was facing in a timely manner. On noticing the impending challenges, Dorsey, through emails sent to its customers, admitted that the company was going to scale back its expansion plans to first handle hardware availability issues and matters relating to handling sizes of transactions users were trying to process through the system (Rose). In doing so, Jack Dorsey sent the company’s co-founder Jim McKelvey to China where the devices were made to look into the hardware shortages that the company was facing during the release and shipments of the square readers.

Competition is normal and is expected in any business setup; how well the company handles it is all that matters. Fittingly, this can be done by turning the challenge into a practical opportunity for increasing customer satisfaction. In relations to this, Square Company has noticed its gaps in service delivery and it is positioned for a massive service and network upgrade in the next 2 years to increase its clients’ satisfaction in a widely evolving consumer market (Cheredar; Lev-Ram; & Siegler).

As glimpsed earlier, the company has also noticed the slow production of its Square Reader in China and worked by sending an executive to the production site to increase card production in line with the company’s expansion plans. The company initially rolled out its card payment service without careful market analysis in terms of the anticipated market response. But it responded, by first stopping further expansion, and working on meeting its working needs.

There is an untapped potential of payment markets that are yet to be fully exploited. An analysis by Neuman shows that consumers in America are changing from using the traditional checkbooks to making payments through credit and debit card. According to the Federal Reserve statistics, only half as many personal and business checks were written last year as in the year 2000, Over the same period, the average amount per check roughly doubled, to more than $1,600—a vivid sign that few personal checks are being written to buy low-cost home products (Neuman).

Many small businesses in America, and the world over, do not accept credit cards because of scanning device costs and fees that are normally associated with processing charges (Romo). This provides the Square Company with an edge because it provides scanning devices to the clients and is connected through a port to the smart phone. Technological advantages such as this should be improved for the company to beat competition (Bradley).

In the near future, Square Company needs to decrease transaction costs to customers because studies have shown that there’s an increasing acceptance of Square services in the micro-economic environment. Jeff Barber and Kurt Schuyer, who jointly own a landscaping company, say that, initially, getting paid could sometimes take weeks because they of the tedious process of emailing clients. However, when they got the square app and the credit card reader device, which can be easily inserted into the headphone jack of an iPhone, Android phone or iPad; payments have been easier to make and it also makes it easier for customers to honor their pledges on time (Elmer-DeWitt).

The company also has to make investments in research for determining the clients’ needs, and tailoring their products in accordance with the market trends and solving consumer problems. The major yardstick already achieved here is the production of a small version of the card reader which is very portable hence payments can be made anywhere with a device that is permanently connected to the phone (MacMillan).

Diversification of services offered should be a priority in that the application should give a platform where different, but vital, online transactions can be done. Dorsey hinted on this when he said that Square can be used not only to process credit cards but can also be used to offer meaningful financial data to customers—for example, information on tax or customer volume (Lev-Ram). This will provide a one-stop-shop where numerous transactions can be done by partnering with the different authorities and businesses that bill clients (Lev-Ram).

In future, it is advisable for the company to re-brand since it had its own share of false starts. In the pilot program, which was launched in 2010, the users waited for a long time for their Squares to be shipped in from China. When the readers eventually arrived, their usability was put into spotlight and criticism because the read head was so relatively smaller than conventional heads found in the market. This made it difficult for them to capture the card data (Pontin). As a result, people were forced to swipe cards repeatedly which was very disappointing at the point of sale. The efforts to make Square easy to use should be encouraged. According to Square’s client, Muir, the things that the company should improve must involve speed, dependability, and price parity.

Works Cited

  1. Bradley, Tony. “Square vs. NFC: Battle of the Mobile Payment Systems.” 2011. PC World.
  2. Cheredar, Tom. “Square’s valuation soars to $1B.” 2011. Reuters.
  3. Elmer-DeWitt, Phillip. “The iPhone as Visa Card.” 2011. Fortune.
  4. Johnson, Andrew. “Square Announces Delay In Mobile-Payment Card Reader Rollout.” 2011. PaymentsSource.
  5. Lev-Ram, Michal. “A Twitter Guy Takes on Banks.” 2011. Fortune. 
  6. MacMillan, Douglas. “Turning Smartphones Into Cash Registers.” 2011. Bloomberg Businessweek.
  7. Neuman, Scott. “Can the Checkbook Make a Comeback?” 2010. NPR. 
  8. Pontin, Jason. “The New Money.” 2011. Technology Review. 
  9. Romo, Vanessa. “Square Businesses ‘Square’Away Client Bill Pay.” 2011. NPR. 
  10. Rose, Charlie, “Interview with Jack Dorsey.” 2011. CharlieRose. 
  11. Siegler, M. G. “Square Delays Mass Roll-Out, Admits They Began Before Things Were ‘Fully Baked’” 2010. TechCrunch. Web.
  12. Square’s Official Website. Web.

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