Square Inc. co-founder Jack Dorsey remains confident in the payments startup’s future despite mounting frustration among some early customers over delays in the processing service and the revelation last week of a further lag in availability.
“We are entering a very complex industry, and we have the right people in the company to adjust,” Dorsey, Square’s chief executive, said Monday in a telephone interview. “What this actually was is, we let our excitement get the best of us.”
Hardware shortages already sparked delays in the shipment of Square’s portable card reader earlier this year.
Dorsey wrote in a message to customers Friday that more delays are likely as it works to shore up the company’s fraud-mitigation capabilities.
“The way we are handling the risk of charge-backs and fraud is through transaction limits, but we have received feedback that those limits are too low,” Dorsey, a co-founder of social-media service Twitter Inc., said in the message e-mailed to users and posted on Square’s website. “We are rethinking and expanding our underwriting infrastructure to address this issue.”
In an interview, Dorsey declined to give specifics on how the company plans to address these issues.
“We just decided we should take some time to rework those before we sent out any more swipers or engage any more people in the pilot or general rollout,” he says.
Square gradually has been expanding a pilot of its service. The company provides users with a square-shaped card reader that attaches to a smart phone’s audio-input jack. It charges 2.75% of the sale plus 15 cents for swiped transactions and 3.75% plus 15 cents for keyed-in, or “card-not-present,” transactions. Dorsey declined to say how many users are involved in the pilot.
The company plans to begin shipping the device to general users this summer, Dorsey says.
The company’s latest update partly acknowledges what many payments analysts have been saying about Square’s plans since it burst onto the scene last year: It failed to take into account the complexities of the payments industry.
“We’ve let our excitement get the best of us and have released parts of Square before they were fully baked,” Dorsey’s message said.
Aaron McPherson, a practice director with research firm IDC Financial Insights in Framingham, Mass., says Square “totally underestimated the market.”
The company’s mistake was releasing parts of the service too soon, Dorsey says.
Limits on the size of payments Square users can accept have caused ire among customers. For pilot participants who went through Square’s activation process, the company set an initial $100 transaction limit and gradually increased it as more information became known, Dorsey said.
James Van Dyke, president and founder of Javelin Strategy and Research in Pleasanton, Calif., says the limits are too low, making the service less reliable for merchants looking for consistent service.
On June 18, Square released a new “activation flow” that enable users to submit more information, such as the type of transactions they plan to conduct, their federal tax identification number and other details, he says.
Dorsey addressed criticism from users upset about Square’s credit-check requirement. “I don’t imagine the Square of the future will have a credit-check process, but right now it’s a good way to understand the ... financial profiles of people who are” signing up, he says.
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