Square vs. VeriFone: A Long Rivalry

December 14, 2012 11:45 AM

Jack Dorsey, chairman of Twitter Inc., attends a question and answer session at the Dublin Web Summit it in Dublin, Ireland, on Friday, Oct. 29, 2010. Dorsey said demand to advertise on the social-networking site, whose users send 100 million short messages a day, is growing following experiments with brands earlier this year. Photographer: Simon Dawson/Bloomberg *** Local Caption *** Jack Dorsey

Simon Dawson/Bloomberg

Pictured: Square's Jack Dorsey (left), VeriFone's Douglas Bergeron (Images: Bloomberg News)

Square, a credit card reader made for smartphones, is arranged for a photograph in New York, U.S., on Monday, Oct. 25, 2010. Square Inc.'s mobile-payment technology allows smartphone users to make credit card payments and the availability of funding for new ventures. Photographer: Jin Lee/Bloomberg

Jin Lee/Bloomberg

In the Beginning

When Square launched in late 2009, it seemed a vulnerable target. The small, no-frills card reader appeared to have little going for it besides the star power of its CEO, Jack Dorsey, who co-founded Twitter. VeriFone already had a competing product in the works. (Image: Bloomberg News)

Brad Newton

Payware Premieres

VeriFone's first card-reading phone attachment, Payware Mobile, seemed like the more complete package. While Square still faced questions about its security and business model, VeriFone promised the same level of security if offers in its other payment hardware, including encryption.

Shoppers stand in line outside an Apple Inc. store in Chicago, Illinois, U.S., on Friday, Nov. 2, 2012. Apple Inc.'s iPad Mini tablet, which boasts a 7.9-inch screen diagonally, goes on sale in the U.S. today. Photographer: Daniel Acker/Bloomberg

Daniel Acker/Bloomberg

Shelf Space

VeriFone was the first to sell its mobile card reader on the shelves of Apple stores. Square followed it about a year later. (Image: Bloomberg News)

Locked Credit Cards

Daniel Grill/Getty Images/Hemera

Spotlight on Security

The companies' rivalry got ugly in 2011 when VeriFone CEO Douglas Bergeron launched an aggressive attack on Square's credibility, accusing the company of selling a device that could be used for illegal card-skimming. VeriFone went so far as to offer a demo card-skimming app to major card issuers to prove its assertion. (Image: ThinkStock)

Visa and MasterCard credit cards are arranged for an illustration in Cambridge, Massachusetts on Wednesday, October 11, 2006. Visa Inc., the largest payment-card network, may raise as much as $17 billion in an initial public stock offering. Photographer: JB Reed/Bloomberg News

JB REED/BLOOMBERG NEWS

Valued by Visa

Soon after VeriFone attacked Square's security, Visa came to Square's defense by investing in the startup. At that time, Square also vowed to add encryption to its mobile card reader. (Image: Bloomberg News)

Setting Sail

VeriFone eventually chose a new approach and a new product. In May 2012, VeriFone launched Sail, a smaller card reader for micromerchants. VeriFone made Sail's software open-source, so merchants could adapt it to use with their inventory software.

An attendee reaches for a cup of coffee at Starbucks Corp.'s 400,000 square foot Leadership Lab in the George R. Brown Convention Center during the company's Global Leadership Conference in Houston, Texas, U.S., on Thursday, Oct., 4, 2012. Starbucks Corp. Chief Executive Officer Howard Schultz said his company plans to add 1,000 stores in the U.S. in the next five years. Photographer: F. Carter Smith/Bloomberg

F. Carter Smith/Bloomberg

Starbucks

In August, 2012, Square got another major investment $25 million from Starbucks, which agreed to use Square's software and processing services. Howard Schultz, Starbucks' chariman, president and CEO, joined Square's board as part of that deal. (Image: Bloomberg News)

Sail 2.0?

In December, VeriFone again changed its approach to mobile payments, announcing it was leaving Square's direct-to-merchant sales turf. It later sold the Sail assets.