Today's launch of Square, a free mobile credit card reader Dorsey's San Francisco company first made available in the U.S. in 2010, is the latest move in a Canadian mobile payment world that already resembles a Wild West. A number of major players — telecoms, credit card companies, banks and others — are already jockeying for position and for the big prizes of revenue and access to customer information.
Square, which the company says is already processing more than $8 billion in annualized payments in the U.S., gives small businesses and anyone selling anything — from piano lessons to cappuccinos — the ability to accept credit card payments by attaching a tiny white peripheral to an iPhone, iPad or Android device.
A free Square Register app works with the peripheral and runs on the mobile device. The transaction rate is set at 2.75 per cent, lower than traditional credit card transaction processing fees.
Dorsey, the company's co-founder and CEO, says there were a number of reasons to make Canada Square's first foray outside the United States, including relationships with banking partners that made it easier to get up and running here quickly.
"We are seeing something that we saw early on in the United States, which is there is a lot of small business activity. There's a lot of entrepreneurial spirit."
Customers could range from someone who wants to sell vegetables at a farmers' market, to a personal trainer or golf coach, to a babysitter. They are the type of sellers who traditionally wouldn't have accepted credit cards, mainly due to the high cost of terminals for processing the payments.
"It was actually locking people out of the economy and locking people out of commerce," says Dorsey.
Square is just one of the new players eyeing opportunities in Canada's growing mobile payment market. Today's launch announcement in Vancouver comes just two days after Research in Motion said it had struck an agreement to help manage security technology that will make it possible for many Canadians to pay for goods and services with their smartphones though "mobile wallets."
The BlackBerry maker has been chosen by EnStream, a company set up by Canada's three largest wireless networks, to provide the security infrastructure that would make the substitute for debit and credit cards at checkouts work.
"We think that the Canadian market is uniquely situated to probably be one of the early adopting markets for cashless or contactless payment solutions," RIM's Canadian managing director, Andrew MacLeod, said in an interview.
"We think this is the perfect opportunity for this type of technology to really get a footprint and get traction."
Traction is key
And in the highly competitive mobile payment market, finding that traction is key.
For Dorsey, the traction comes most significantly not through the technology, but by offering a way of "making commerce easy for everyone."
Square is "providing the simplest and cheapest tools" to allow people to "immediately provide the best customer experience in whatever they do," he says.
"We think that's what builds natural loyalty and we think that's what really the mainstream wants to see and what people want to use on a daily basis."
For Dorsey, the technology should not be front and centre in the transaction.
"Technology is only good if it really fades away and it does something that humans actually want to do and it makes a commodity experience more personal. We believe that Square does that extremely well and we haven't seen anyone else in the market do anything close to it."
To begin with, the Square reader will accept credit card payments from Canadian customers. The free Square Register app will also offer merchants a point-of-sale system for accepting payments and tracking inventory, something Dorsey touts for its ability to help owners make decisions around their business's growth.
In time, Dorsey says the company may add a service available to U.S. merchants that creates what he describes as a "really unique VIP experience."
In the U.S., through localization technology, a regular customer at a business such as a coffee shop can walk in carrying a mobile device and be recognized because his or her picture pops up on the merchant's screen. The merchant could then have the customer's regular cappuccino or latte waiting on the counter.
"I then walk out. I don't bring out my wallet, I don't bring out my phone. It's all taken care of. So that's how we believe payment should be, should feel ... it shouldn't feel like a burden at all," says Dorsey.
The launch plan for Canada involves getting merchants on board, so they can accept the cards people already have en masse in their pockets — Visa and MasterCard — "and then bringing more of this [VIP experience] as quickly as we can," says Dorsey.
New payment network
Dorsey is under no illusion about the realm entered by Square, which was born after co-founder and glass artist Jim McKelvey was unable to sell one of his works because he couldn't accept a credit card. Dorsey calls it the "most competitive and heavily defended industry in the world."
But Square's approach to mobile payments in the U.S. has garnered attention. Rick Oglesby, a senior analyst with Aite Group, a market research firm specializing in financial services, says Square has had "really explosive" growth and a lot of success so far.
"They're a very high-potential company, very disruptive influence, so I think that they make the payments world a little bit better, a little bit stronger," he said in an interview from Las Vegas.
While the company is relatively small, Oglesby sees the chance for it to grow.
"They signed a deal to process all of Starbucks payments, so I think they have the potential to become really a new payment network."
But Square's competitors aren't sitting idle. Online payment giant PayPal, for example, launched a trial of its own free thumb-sized card reader, PayPal Here, in Canada in March and offered it to select merchants, with a wider release expected later this year.
Oglesby says changes in the payment world are inevitable in Canada because of mobile technology, particularly since businesses would like to see customers make payments on phones due to the extra communication channel it provides with consumers.
"Mobile technology is going to drive that whether it's through Square or somebody else, because the opportunity is so big," he says.
"At the same time, Square's been one of the leaders in the space in the U.S. and I would expect them to be so in Canada."
Lessons from Twitter
Some of Dorsey's inspiration and guidance for Square has come from his experience with Twitter, the microblogging service that Forbes recently reported is on target to hit revenue of $290 million. (Forbes puts a value of $845 million on the 26.4 per cent share of Square Dorsey owns.)
"I learned a lot from what we did right and also what we did wrong at Twitter that immediately went into how we built Square," says Dorsey, "and I'm proud that Square's making its own new unique mistakes rather than repeat mistakes from the past and definitely moving faster than we were able to in the early days of Twitter."
Dorsey says at Square and Twitter, there's been a similar mindset at work.
"We're going to build something that we want to use and that we love and would love to see in the world. And we're making a bet that other people would love the same and so that's proven to be the case in both cases."
Still, the question remains: How do you know when to take that bet?
Dorsey says it's just a feeling, like the feeling when Twitter sent its first tweet, and 20 phones buzzed around the office.
"It was magical," he recalls. "For me, any technology that makes you feel superhuman, like you have a special ability that no one else has, is something to make a big bet on."