Visa Makes Square Bet

Visa is placing huge bets on Square, a mobile payment startup founded by the co-founder of Twitter, Jack Dorsey.  Visa is increasing Square’s prospects and essentially “putting them on the map” by giving the startup financial support and granting them access to a new advisory board.  While Square raised $27.5 million from Sequoia Capital earlier this year, Visa’s undisclosed financial investment and interest in the company takes the sector to a new level.

Square’s technology enables anyone with a smartphone to accept credit card payments by means of a small piece of equipment that plugs into the phone and allows consumers to swipe their visa cards.

Visa is confirming that the trend for mobile payments is real and it wants to be a major force. On May 12h, Visa announced that it is rolling out a new “digital wallet” in the U.S and Canada this summer.  Visa’s “digital wallet” will keep personal information such as account numbers, expiration dates, billing and shipping addresses, rewards programs in one secure location, one click away.  Visa’s extensive security will ensure that all of the personal information is safe. In fact, Visa’s presence adds significant credibility to the whole mobile and digital payment space that should help eliminate any fears about fraud.

Visa plans on expanding globally, particularly in emerging markets where credit card use is on the rise. Visa can benefit from Square as it has the potential to convert 27 million businesses that currently do not accept credit cards.  Square’s ease of use and no transaction fee model is introducing many new businesses to credit cards.

As mobile payments become a prevalent trend Visa, MasterCard and American Express are all aggressively positioning themselves at front and centre of this boom. If the credit card companies fail to proactively take a stance they could be potentially excluded from the process altogether.

Market watchers note that Visa will learn a lot from Square regarding strategy for new markets. Down the road, Square could be an attractive acquisition target for Visa and that might even bring in some type of alliance with Twitter because of the Dorsey connection.