Visa Makes A Strategic Investment In Disruptive Mobile Payments Startup Square
There is no doubt that mobile payments company Square is on a roll. The company just landed a lucrative deal selling its credit card readers in Apple's retail stores and is growing at a fast clip.
Context & Ripple Effects
Square has been scaling hard since producing 10,000 card readers a day in September 2010, and earlier this month TechCrunch reported the retail boost from selling readers in Apple's stores. That puts a consumer-grade dongle for card acceptance in front of millions of shoppers just as rivals like Mophie and Intuit were positioning their own iPhone payment bundles against it.
Visa's strategic investment is the network's answer to that momentum: rather than fight the upstart, an incumbent card brand is taking equity in the company pulling small merchants onto card rails. It matters because Square's threat model has always been disintermediation of traditional acquiring relationships, and this converts part of that threat into alignment.
First-order effects
- Square gets strategic capital and implicit network-level endorsement at the exact moment its Apple retail deal widens distribution, strengthening its hand against the Mophie–Intuit bundle competing for the same iPhone-merchant base.
Second-order effects
- Competing mobile-card-acceptance vendors must now argue differentiation against a rival carrying a major card network's backing, while other networks and acquirers face pressure to make their own moves into smartphone-based merchant acceptance.
Third-order effects
- If incumbents respond to hardware-led disruption by investing rather than blocking, card-network economics shift toward equity participation in the acceptance layer — a pattern that would concentrate influence over small-merchant payments in fewer, allied hands.
The trend: Incumbent card networks are increasingly hedging mobile-payments disruption by taking strategic stakes in the very startups unbundling traditional merchant acquiring.