Square Payment Pace Rises 25% in Niche Coveted by EBay
Square Inc., maker of credit-card readers for smartphones and tablets, has increased its payment volume 25 percent since March, when EBay Inc. (EBAY)'s PayPal showed off a new mobile scanner and underscored growth in the field.
Context & Ripple Effects
Square's acceleration lands one month after PayPal moved onto its turf: on March 15, 2012, EBay's unit unveiled PayPal Here, a dongle for accepting cards on phones that it pitched as 'the future of commerce' for small business — the same reader-plus-app model Square built. The timing matters because PayPal is not a startup challenger; it had just posted its first $1B revenue quarter in July 2011 and claims 14 years of small-business processing relationships.
The other backdrop is capital: Visa took a strategic investment in Square in April 2011, putting a card network directly behind the company now outgrowing the niche PayPal covets. That the volume number rose 25 percent in the very month PayPal Here shipped suggests the entrant validated the category more than it dented the incumbent.
First-order effects
- PayPal Here launches into a market where the incumbent is speeding up, not stalling — Square's 25 percent volume jump since March means PayPal must win merchants already adopting a rival's reader.
- Square gains a proof point for merchants and investors that demand for phone-based card acceptance is expanding fast enough to absorb a second major player.
Second-order effects
- Reader economics become the battleground: with two dongles chasing the same micro-merchant, transaction fees and next-day settlement terms — not hardware — become the differentiator, pressuring smaller rivals like Intuit and Verifone that unconfirmed reports had already flagged as targets of PayPal's dongle plan.
- EBay's move ties PayPal's offline ambitions to its online base, pushing cross-channel bundles (marketplace plus in-person acceptance) that a standalone reader company cannot yet match.
Third-order effects
- If smartphone attachments keep displacing dedicated terminals, the point-of-sale layer for small merchants consolidates around a few software-led platforms — with card networks hedging by investing across contenders, as Visa did with Square.
- The contest pushes payments toward whoever controls the merchant relationship end-to-end, making the reader a customer-acquisition tool for broader financial services rather than a product in itself.
The trend: Small-business card acceptance is migrating from dedicated terminals to smartphone dongles, with scaled payments platforms — Square and PayPal — racing to own the merchant relationship.