Square, the startup that wants to kill the credit card, is adding Larry Summers to its board. Summers was President Obama’s Director of the National Economic Council, and before that President of Harvard University and President Clinton’s Treasury Secretary. He’s generally recognised as one of the most talented (and influential) economists alive.
Why Summers, beyond the fact that he’s a really smart guy?
Easy. Square is in the financial services industry, one of the most regulated. The biggest problem for startups who want to make financial services better are regulatory barriers to entry.
Square wants to replace the credit card. Right now it uses a reader that makes accepting plastic easier for merchants, which should drive more business for the credit card companies. Indeed, Visa invested in Square. But the end goal is to do without the credit card altogether. Indeed, Square’s new point of sale system doesn’t require you to have your card on you.
When the credit card companies realise what Square is up to, they will call up their friends in Washington, stir up fear about Square’s security, and try to crush it through regulation. It’s what almost happened to PayPal when it was growing up. Back then, the guy who ran their government relations was a man named Keith Rabois, now Square’s COO and one of Silicon Valley’s top powerbrokers.
Having one of the most respected policymakers in America on its board is great ammunition for Square for the coming fight.
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