Tag Archives: technology

Opportunities that will enable Square to significantly grow Pay with Square

I’ve written about online and mobile payments before. It’s a young industry with still a lot of room for growth. I came across a few articles about Pay with Square. Based on my personal experience, I am bullish on this new way to pay. Some people believe Pay with Square is ahead of its time, but I think it has the potential to fundamentally change how we pay at the cash register. To me, that’s super exciting. Anything that can reshape culture or established norms gets me excited.

If I were on the team at Square running the Pay with Square (“PWS”) program, here are a few things I would do to ensure that it is a mega hit and goes mainstream.

1. Increase the size of merchant base through strategic partnerships.

Handshake

Square has many fans (and I am one of them), but the chief complaint I’ve heard is that not that many merchants give customers the ability to use Pay with Square. To address that issue, Square should form strategic relationship that will quickly bring on board thousands of merchants.

Square has grown tremendously over the last 1-2 years. Its current strength is with local small to medium sized merchants, but there’s no reason why it couldn’t pursue opportunities on a regional or national level. Square may have to lower its rate slightly in order to work with large retailers that have higher ticket items, but its 2.75% fee is very competitive for lower-ticket items, such as donuts, coffees, most goods at convenience stores, etc.

I lived in Boston for nearly 10 years. One thing it’s known for is Dunkin’ Donuts. They are everywhere. In fact, there are about 2,000 Dunkin’ Donuts in the Boston metro area. What’s interesting is that a lot of these are kiosks inside the T or Commuter Rail stations. I remember missing the T during a morning commute once because I had to wait for the cashier to print a receipt I had to sign. Square should partner with Dunkin’ Donuts and enable its patrons to Pay with Square.

Bottom line: Square should accelerate merchant acquisition by developing strategic relationships with a network of retail stores or franchises, such as Dunkin’ Donuts. I am sure there are plenty of other examples, but I think I am in the mood for doughnuts right now so that’s what came to my mind first. I think where Square can really shine is high-traffic, quick turnover retail shops with simple menus.

2. Provide incentives to merchants to promote Pay with Square to their customers.

Square must use both push and pull strategies to drive adoption. Once it acquires merchants through partnerships, Square must keep them accepting Pay with Square. To do this, the PWS team should work with the Marketing team to design a marketing program that incentivizes merchants to promote PWS to their customers. For example, Square might consider reducing its fees for merchants that meet a minimum PWS transaction volume each month or create attractive loyalty programs for PWS users. The reduced fees give merchants a monetary incentive to promote PWS to their customers. I talked to a few merchants who use Square and they didn’t seem to really care to promote PWS to their customers. Of course, the PWS team would need to run the numbers with the Marketing team to figure out what’s optimal from a financial perspective.

Now, here are some ideas for what I think Square should to do continue to grow its users.

3. Partner with mobile device manufacturers to get the Pay with Square app pre-installed on phones.

This partnership could take some time to put in place, but it would be a fantastic way for Square to accelerate user adoption. My guess is that Square is already looking into this. It should target Apple, Samsung, LG, etc to get the PWS app pre-installed on mobile devices.

The basic pitch here is that consumers are buying a phone that has “money” in it in the form of bonus credits from Square. Square should give a generous amount like $20 to a new user who signs up through the pre-loaded app. So if you buy a $200 phone, it would actually cost only $180 because you are getting $20 from Square. At the time of setting up their phone, users would be prompted to sign up for an account to activate their app to redeem their bonus.

To convince the OEMs to get on board, Square should do a rev share on the transactions from the pre-loaded app. Users will want to link their info with the app to claim their bonus credit and OEMs will push the users to register because they’ll want to get a cut of the transactions. Obviously, Square would need to run the numbers to figure out the optimal approach (i.e. rev share amount, bonus cost, potential cannibalization, etc.).

4. Work with the Product team to build features that will encourage more frequent usage.

Getting new users isn’t enough. Square needs to get them to use the app frequently. One product feature I would like to see is the ability to add multiple credit cards and other payment methods, such as gift cards or coupons. This would give users a reason to use PWS everyday because they would truly be able to leave their wallets at home. By allowing users to load the PWS app with additional credit cards, coupons, gift cards, etc. Square can become a true “e-wallet.” In fact, this feature might be necessary if Square wants to work with a national retailer and allow them to accept coupons or their branded gift cards (e.g. Dunkin’ Donuts gift card). This may be slightly outside the scope of PWS team’s job description, but it’s a feature I’m sure they would love to talk to merchants about.

By: Jonathan Lee
Twitter: @hi5at5

Should I attend business school or go work at a start-up?

I recently had the opportunity to talk to a smart, friendly guy who’s working at a well-known investment advisory firm. He wanted my advice on whether he should go to business school or take the risk of working for a start-up.

This person had recently been admitted to a top 10 business school in the Northeast. He’s already told his employer that he would be leaving this summer, but hasn’t made up his mind about what to do. Given his background, he eventually wants to work in venture capital and invest in start-ups. He felt that he was more of an investor than an operator.

Network vs Experience

Being part of an elite network could give you access to top executives. It could certainly help you close large deals. It could even help you find a job if you get laid off. MBA is a great networking tool. It will certainly help you build your LinkedIn connections. There’s a reason a lot of the partners at top venture capital firms have MBAs, although that’s not necessarily the case with some of the younger partners at newer VCs.

On the other hand, there’s nothing that can replace real life experience of working at a start-up. If you want to be able to relate to founders, you must either bring personal operating experience or have experience working with many entrepreneurs. You cannot learn venture capital by taking a class on entrepreneurship or venture capital investing. HBS cases, as good as they may be, do not reflect how difficult it is to fight for deals. They do not help you understand what it’s like to sit across the table from an entrepreneur who has poured every ounce of his energy and his entire life savings into the company and say “no.”

This person is a career switcher, sort of. An MBA is great for that. That’s why people take summer internships. However, if you have the opportunity to do something new now without an MBA, you should definitely take that opportunity. Salespeople says, “Always Be closing.” To those contemplating choosing between an MBA program and a start-up, I say, “Always Be Learning.” Remember that most of the learning in life occurs outside the classroom.

Getting an MBA is safer than working at a start-up

We get health insurance not because we want to get sick, but rather because we want to be able to pay for all medical expenses in case we do get sick. An MBA is a great career insurance, but it’s also an expensive one. Weigh the costs. What is your drag coefficient? Can your tolerate the start-up lifestyle? The chance of achieving monetary success is probably bigger for an MBA than it is for an entrepreneur. Most start-ups fail while most MBAs will steadily climb up the corporate ladder. There’s nothing wrong with climbing the ladder. It’s a good way to make money and your family will appreciate you for it.

However, you also have to consider the cost of missed opportunities. Let’s face it. Life is ridiculously short. One of the top five regrets of the dying is, “I wish I had the courage to live a life true to myself, not the life others expected of me.” Many people have unfilled dreams. Give yourself the freedom to pursue your passion. If everyone played it safe, our history books would be mind-numbing and boring. That said, it’s important to note that the second  most cited regrets is “I wish I hadn’t worked so hard.” Starting a company or working at a start-up is a lot of work and most of that is not glamorous work. Honestly, a lot of it is pure grunt work. It’s a huge time investment.

What matters the most is you. 

It’s not the degree and it’s not where you’ve worked, no matter how “hot” that start-up might have been. If you want to be a venture capital investor, or anything really, you have got to try your best to make the right connections and equip yourself with the right skills. I’ve seen both successful MBAs and entrepreneurs become venture capitalists. I’ve also seen the reverse where mediocre former entrepreneurs and MBAs, despite wanting desperately to become a VC never quite get there. As we’ve all been told byour parents and teachers, we are are responsible for our own actions.

Therefore, whatever path you choose, whether that’s getting MBA, MS in something cool, or joining a start-up, make sure you have the end goal in mind. Go do what you love. Don’t do something because you think it’s the right stepping stone to something else you want.

By: Jonathan Lee
Twitter: @hi5at5