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Summary:

Square said today it’s up to $2 billion in annual payments processed and has activated 800,000 merchants for its payment system, up from half a million in May. And it’s made a key change in the way it process payments to appeal to larger merchants.

Square COO Keith Rabois

Square COO Keith Rabois

Square is still an upstart in the mobile payment world but it’s showing that even with the approach of a new merchant payment system from PayPal this week, it’s got plenty of momentum on its side yet. The San Francisco start-up said today it’s up to $2 billion in annual payments processed and has activated 800,000 merchants for its payment system, up from half a million in May. And it’s made a key change in the way it process payments to appeal to larger merchants.

The news comes as PayPal prepares to show off a new in-store solution for merchants at its X.commerce Innovate developer conference that will place PayPal into direct competition with Square. PayPal has been a powerhouse online, but only recently has it set its sights on being a solution for in-store merchants and retailers, something Square is disrupting with its small mobile credit card swipe dongles and its new cashier and digital wallet software.

Square is trying to make sure that it stays ahead of some big names like PayPal, Google, Intuit and cellular carriers, who are looking at enabling more mobile payments and digital wallet tools. In that vein, Square said today it is lifting a limit on merchants that prevented some businesses from immediately receiving all the money they made beyond $1,000 in a week. Merchants had to provide additional verification and work with Square on case-by-case basis to cut back on the amount of time it took to receive the additional cash in their bank accounts. Now, the rule, which was originally instituted to combat fraud, has been set aside, which should be helpful in attracting larger business customers. It’s another gesture aimed at winning over merchants, like the transaction fee that Square discarded earlier.

The new rules are another sign that Square is prepping to compete hard in this space. COO Keith Rabois appeared at the GigaOM Mobilize conference last month and said we should expect some more services to roll out this month and in December. Rabois told TechCrunch that Square’s merchants now represent 10 percent of the merchants using Visa and Mastercard. And he told AllThingsD that 70 percent of Square users have never taken credit cards before.

Rabois has been really vocal about dismissing the challenge from PayPal, which he said has let its brand “atrophy.” But with PayPal finally wading into the much bigger market for in-store offline payments, it’s going to be interesting to see if it can take a bite out of Square. It sounds like there should be room as Square looks at smaller merchants while PayPal will likely tap existing customers and bigger retailers. But overtime, as each company’s ambitions grow, there’s going to be move overlap. Square, which raised $100 million earlier this year, continues to appear up to the challenge.

  1. Thad McMullen Monday, October 10, 2011

    Healthy competition is always great for the consumer.

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  2. Both John Donahoe and Scott Thompson are simply delusional if they think that PreyPal can ever be even a minor threat to the existing banks/Visa/MasterCard payments systems at traditional Point-of-Sale—the idea is pure science fiction. (Beam me up Scotty!)__The real question is, when are the world’s various “banking” regulators going to finally do something about over-sighting this most amoral, unprofessional, unregulated, clunky “financial” operator that acts like a bank but is actually no more than a money gouging arm of the Ho’s “eBafia”?__Even though PayPal clearly offers banking-type services (ie, holding users’ funds in non-prudentially regulated and non-FDIC insured banking-type accounts), PayPal is mostly only registered in some places not as a “bank” nor as a provider of credit but only as a “money transmitter” (like Western Union), and indeed PayPal has disingenuously claimed that they are not even a “payment network”, and there is a degree of truth in that claim because it could be put that most (but not all) of their activities do no more than facilitate the transmission of money by riding on the back of the banks’ existing payments processing systems. __In fact, the only thing creative about PreyPal has been their founding use of users’ unique email addresses as identifiers for online payment transactions. PreyPal is otherwise no more than a blood-sucking parasite riding on the back of, and in the main cannot function except via, the banks’ existing payments processing systems.__Regardless, outside of its mandated use on whatever will ultimately be left of the Donahoe-devastated eBay Marketplace, PreyPal (and any other third-party payments processors) will undoubtedly be consigned to the history books by the retail banks/Visa/Mastercard once those players get their “online” act together. There is nothing surer than the sun will rise in the morning.__Having said that, it’s possible that PreyPal could survive by becoming the merchant account “provider of last resort” for those “merchants” unable to get a real merchant account from their own bank—Oh, hang on, hasn’t PreyPal always been just that?__PayPal claims PayPal Is Not a Payments Processor! _http://forums.auctionbytes.com/vbulletin/showthread.php?t=24148 __eBay-Facilitated and Condoned Shill Bidding Fraud on eBay Auctions: Case Study #4: _http://forums.auctionbytes.com/vbulletin/showthread.php?t=23540 __And from along the way a compilation of (mostly inane) quotes from eBay executives: _http://forums.auctionbytes.com/vbulletin/showthread.php?t=24159 __Enron / WorldCom / eBay / PayPal / Donahoe: Dead Men Walking._

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    1. Hey Phil – sounds like someone broke the rules and limited. From your little unfounded rant you sound like nothing more than a 3 year old throwing a fit. Read before you click. Follow the rules and you’ll be a part of over 100 million HAPPY active users. Or, you can follow the tech news and comment with blatent lies and inaccuracies. Good luck with your life. If PayPal is holding your funds, I hope they keep them. I’m sure your $5.99 is making them millions in interest.

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      1. And I love that you’re quoting forums. There’s only truth out there. Please make sure you believe everything you read. Go back to your mom’s basement, put your foil hat back on and play your video games. Leave the news to the journalists.

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