Square May Be A Billion Dollar Company, But Boy Is Its Market “Niche”

Jack Dorsey

In June, Kleiner Perkins invested $100 million in Jack Dorsey’s mobile payments company Square

Valuation: $1 billion.

Square allows merchants to accept credit cards through their iPhones and iPads.

Does it justify that valuation?

We asked PayPal VP of product and design Sam Shrauger during our wide-ranging discussion on the state of the payments world.

Here’s his answer:

Business Insider: What’s innovative about Jack Dorsey’s “Square?” What’s he up to? I mean it’s this dongle thing. People can take credit cards to their iPhones? What’s going on here? Why is it worth a billion dollars?

Sam Shrauger: (laughing) Well, I won’t comment on the valuation, that’s up to the market, but I think that its an interesting idea that’s serving a very specific segment of the market; users that want to take physical credit card payments at point of sale terminals throughout the world without paying for all the gear and software, and without going through the process to create the bank relationships to receive credit card payments.

BI: Is that a big market, that merchant base?

SS: Well, it’s an interesting question from my standpoint. There are a lot of cases where there are needs for that.

I think the question is, what’s the frequency of that need?

How many people are really in that situation?

In a lot of ways they’re doing something very similar to what PayPal did in that they’re in the sense that they’re providing access to a payment system for a set of parties that haven’t had a better solution for that.

We look at that and say, ok there’s a segment out there, let’s call them “the casual offline merchant segment” that occasionally take credit card payments.

What PayPal has done is say, we’re a payment system that can take payments from any device and we’ll look at that segment but it’s a very specific segment. It’s a niche, but it’s really just a question of how big that niche might be and then ascribe the valuation that people have to it.

Click here to listen to the whole interview >>