As more tech companies enter the e-commerce space, Jack Dorsey believes Square’s biggest advantage is building an ecosystem of financial services and operations tools that will keep entrepreneurs on the platform. The founder and CEO of the payments platform spoke at Ryerson University in Toronto on Tuesday about Square’s expansion, opportunities in cryptocurrency and building a financial services company.
“We compete with lenders for Square Capital, POS manufacturers for the POS, payments providers with Square,” said Dorsey when asked about Square’s biggest competitors. “We’re rather unique in that we have a whole ecosystem of tools for economic empowerment, so we don’t see a lot of competitors in that regard. As we bring more tools in the ecosystem, it gets more and more pronounced.”
Square CEO Jack Dorsey said that its existing ecosystem of merchants and financial tools can make it more attractive to entrepreneurs compared to competitors like Shopify. Square and Shopify have been encroaching on each other’s spaces—in point of sale and e-commerce, respectively—over the last several years with new product launches.
The e-commerce industry has been heating up over the last year as Ottawa-based Shopify and Square inch into each other’s respective spaces. Shopify has made servicing physical retailers a key part of its expansion. In May 2018, it announced an updated tap and chip card reader. In January 2019, it appointed Ian Black, former head of UberEats North America, to lead its physical retail division.
Square, which is used by more than two million merchants, has been moving into the e-commerce space. In April 2018, it announced the US$365-million acquisition of the website builder Weebly. It has since re-launched its online store functionality using Weebly’s technology. In November 2018, MailChimp partnered with Square to launch shoppable landing pages. However, functionality is limited, as landing pages don’t act as full e-commerce stores offering multiple items for sale yet.
While Dorsey was on stage with moderator Takara Small, The Information reported that Microsoft was considering creating e-commerce tools that would put it in competition with Square and Shopify.
“I haven’t seen what they announced, but we’ve seen a lot of people enter into the market,” said Dorsey when asked about the news by The Logic. “I think we’re focused on what sets us apart, and what sets us apart is we’re self-serve, we’re fast, we’re elegant and, more than anything else, we have an ecosystem. So it’s not just POS [point of sale] or e-commerce; it is all these tools that help you build your business.”
Square could see an uptick in new users after MailChimp’s popular Shopify integration was pulled from Shopify’s app store following a data-sharing dispute between the two companies. Analysts told The Logic that alternate email marketing services and third-party workarounds would limit disruption for Shopify merchants using MailChimp. But new merchants might consider MailChimp access a dealbreaker.
Square originally launched with a point-of-sale card reader that let businesses accept credit cards using a mobile phone. The company has since begun offering services beyond payments processing that help entrepreneurs with business operations. Dorsey cited tools like Square Capital, launched in May 2014, which gives loans to entrepreneurs; Cash App, its peer-to-peer and mobile payment app; and its instant deposit and invoicing software. In September 2018, the company also launched Square Payroll, an app for its payroll management service.
Dorsey said Square’s financial services products are among those seeing the most growth, but its competition offers similar services. Shopify launched its merchant advance service in April 2016, although it’s much smaller: Shopify Capital issued US$71.8 million in advances and loans in the fourth quarter of 2018, compared to Square Capital’s US$472 million, according to the two companies’ financial statements. Shopify has also launched shipping services and, in June 2018, it acquired Return Magic, a software platform for refunds and sent-back merchandise.
Cash App similarly competes with Venmo, whose owner PayPal has its own card reader and payment processing services. And, accounting software platforms like Wave and FreshBooks have long offered invoicing and deposit tools.
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Dorsey said running a financial services company means dealing with regulations in new countries before Square can offer services, a process that Dorsey said can take five to 12 months. It also means Square has to be focused on its biggest markets. “It forces us to be cognizant of our resources and the tradeoffs we’re making, and forces financial tech companies to focus on the largest markets first, and go down. It’s not what we want to do, ideally,” said Dorsey, who added that the company would like to focus outside the U.S. and key markets. He did not specify which markets Square is most interested in.
During the media question-and-answer period, Innisfil, Ont.’s pilot project—which allows citizens to use cryptocurrency to pay for government services— was discussed. Dorsey said small cities may be a good way to experiment with technology that are challenging to execute on a larger scale. “I think it would be good for us to focus on small cities and small towns,” he said. “When the internet has a native currency, a financial tech company can launch an app and the whole world can use it instantly instead of going market to market.”