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Emerging Payments

Square: 'We Have the Chops' to Serve Bigger Merchants

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Square has built its reputation as a quick and simple way for micro-merchants to accept card payments, but the company says it has proven it can serve the more demanding needs of larger retailers.

When Starbucks invested in Square last year and agreed to use Square's processing services, the coffee giant chose not to use Square's hardware, a decision that seemed to indicate Square's product was not ready for such a large client. However, Starbucks didn't need new point of sale hardware — what it needed was analytics.

Starbucks "wanted to forge a deeper relationship with their customers," said Sarah Friar, Square's chief financial officer. "We can give you a very deep sense of who your consumer is."

Square CFO Sarah Friar

Square CFO Sarah Friar

Prior to signing on with Square last year, Starbucks did not have a way to electronically track which customers were ordering which products, Friar said. Now Starbucks uses Square's business analytics software.

She added that the $10 billion in annualized gross payment volume that Square has processed for more than 3 million merchants demonstrates its technology is robust enough to meet the needs of large retailers.

"We've proven we have the chops to do this," Friar said.

Speaking during the closing session of this week's National Retail Federation convention in New York on Wednesday, Friar detailed Square's efforts with both small and large retailers, as well as the opportunities that exist with its new consumer-facing mobile wallet.

For smaller merchants wanting a more off-the-shelf option for tracking sales, Square offers the Square Register app, which it claims can perform many tasks merchants need at the point of sale. Square also offers Square Wallet, which lets consumers use just their mobile phones to make payments from a linked card account.

Square retailers that move from just using the mobile card reader and register app to also accepting the wallet have experienced a 15% increase in sales, Friar said.

Square Register, a free app, doesn’t have as many features as products designed for traditional retailers, such as Intuit's Quickbooks Point of Sale — which, in its cheapest version, costs $1,100. Friar said Square is increasingly serving a different sort of merchant.

"When people think of us, they think of traditional retailers, but we're seeing a massive uptick in things like professional services like haircutters, dog walkers, doctors and lawyers," Friar said.

Friar explained how a retailer can use the Square Register app on a tablet device to track customer purchases and inventory to create targeted promotions. For example, a restaurant with excess perishable items can target two-for-one promotions to its customers that have demonstrated a pattern of buying that item, eliminating the restaurant's waste and increase sales.

Square also provides merchants such as Starbucks a location-based marketing opportunity through the Square Wallet. The mobile wallet provides consumers with a real-time directory of Starbucks locations in their area, along with other merchants that use Square.

"The idea is to open the door to consumers," Friar said.

As the Square Wallet evolves, the technology will be able to use consumers' past purchasing activities to provide suggestions of other local retailers that might interest them, particularly when they're in a new neighborhood or visiting another city.

Users can also add Square merchants as favorites in their wallet and when they visit that retailer. The technology interfaces with the retailers' Square Register, allowing customers to initiate payments by providing just a name.

"When I get close to my favorite places, I don't even need to take my wallet out of my pocket. I can have a fabulous experience on the payments side that doesn't interrupt my experience in the store," Friar said.

"Usually my phone is buried at the bottom of a massive bag," she continued. "My face will come up on the register and I say, 'put it on Sarah,' and that's it."

Square last month added a gift card feature for users to send gifts to friends. Friar gave an example of using the wallet to quickly send her assistant a gift card to a local bakery near their office. The bakery accepts Square, but is too small to have the gift card capabilities of larger merchants.

"As you rethink mobile, it really opens the door for all businesses the things that large retailers take for granted," she said. "It's a great way to democratize all the things that big merchants do, but still keep that uniqueness that you've developed."

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