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OPINION: Three things that made us a long-term believer in Square

Square took the mobile payments market by storm, making it possible for card payments to be taken anywhere by anyone

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  • Written by  Ramneek Gupta, Managing Director, Co-head Global Venture Investing, Citi Ventures
OPINION: Three things that made us a long-term believer in Square

Square took the mobile payments market by storm, making it possible for card payments to be taken anywhere by anyone -- but the company has endured its fair share of hurdles and doubters along the way. Our investment team is regularly asked what made us an early believer and long term holder in the company. The company’s eventual rocketship growth surprised many, but we saw three things early on that set Square apart and sustained our belief in the company.

SMBs empowered with more than just payments

From the onset, founders Jack Dorsey and Jim McKelvey had a vision grander than providing a payments product. Their vision was to help SMBs operate and grow their businesses with the same level of sophistication as Amazon. They successfully removed the friction associated with obtaining a merchant account and people and organizations that had been unable to accept card payments were suddenly offered a seamless solution that removed their payments limitations.

Their vision drove a product development philosophy that served its clients holistically instead of through point solutions. I clearly remember our first meeting with the Square team. The key discussion wasn’t about their credit card acceptance solution, but instead about how the company could provide more integrated solutions, and one idea ultimately became Square Capital.

This holistic vision is why we believe Square ultimately became successful in offering SMBs the entire range of products and services they needed in addition to payments (e.g. analytics, inventory management, credit, eCommerce, delivery, appointment management, CRM, digital receipt management, etc.) in a seamless, verticalized stack. And with so many integrated products, Square had the ability to provide SMBs real-time data and insights into their business.

A company built around a central, common data stack and architecture

Square’s products were just as much about the hardware as the data. The team built all of its products around a common data structure that was leveraged by all of its products and services. This included marketing, onboarding, risk underwriting, fraud, operations, and product management. The benefits of building products around a modern data infrastructure went a long way in differentiating Square’s offering. In one of the discussions with the team, I was amazed to realize that they were able to manage fraud with a team that was an order of magnitude smaller than others in the space processing comparable payment volumes.

Most competitors in the payments processing space attempted to replicate a single product or feature offered by Square, but were never able to compete because Square’s success was driven by its ability to create a whole that was more than the sum of its parts.

Network effects

One of Square’s competitive advantages was that it was able to build a huge network of merchants at a very low cost. This was enabled by the simplicity and elegance of its product and customer onboarding processes, progressive risk management and brand recognition, which helped the brand become synonymous with the payments processing space for SMBs.

Square armed SMBs with a seamless stack of products and services that helped them manage and grow their businesses. The company’s focus on the needs of its client base paired with a modern data-centric tech stack and an emphasis on product and engineering is what set it up for unparalleled success in the space.

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