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MIAMI — Jack Dorsey wants to give the taco trucks of the world an easier way to serve card-carrying consumers. But the founder of the payments software provider Square Inc. has his sights set on big-box retailers as well.
June 11
Square Inc. co-founder Jack Dorsey defended the payments startup's strategy after complaints from some customers over delays in the processing service and the revelation of a further lag in availability.
"I think we are entering a very complex industry and we have the right people in the company to adjust," says Dorsey, Square's chief executive. "I think what this actually was, is we let our excitement get the best of us."
Hardware shortages had already led to delays in the shipment of Square's portable card reader earlier this year.
Dorsey wrote in a message to customers that more delays are likely as Square shores up its fraud defenses.
"The way we are handling the risk of chargebacks and fraud is through transaction limits, but we have received feedback that those limits are too low," Dorsey, a co-founder of the social media service Twitter Inc., said in the message, which was e-mailed to users and posted on Square's website. "We are rethinking and expanding our underwriting infrastructure to address this issue."
In the 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 said.
Square gradually has been expanding a pilot program 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% plus 15 cents for swiped transactions and 3.5% plus 15 cents for keyed-in, or card-not-present, transactions. Dorsey declined to say how many users are involved in the pilot program.
Dorsey said the company plans to begin shipping the device to general users this summer.
Square's latest update partly acknowledged what many payments analysts have been saying about Square's plans since it burst onto the scene last year: They 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 IDC Financial Insights in Framingham, Mass., said that Square "totally underestimated the market."
Dorsey said his company's mistake was releasing parts of the service too soon.
Restrictions on the size of payments that Square users can accept have bothered customers.
James Van Dyke, the president and founder of Javelin Strategy and Research in Pleasanton, Calif., said the limits are too low, making the service less reliable for merchants looking for consistent service.
Square has been gradually raising the limits of the pilot program participants as more information about them becomes known, Dorsey said.
On Friday the company released a new "activation flow" that lets users submit more information, such as the type of transactions they plan to conduct, their federal tax identification number and other details, he said.
Dorsey addressed criticism from users who are upset about the 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 said.
