The new payment system that Square launched today is going to have a profound effect on how people pay for stuff in the real world—perhaps as profound as the iTunes store has had on the distribution and sale of digital media. And in the process, it will likely upend the entire payments industry.
The interesting thing, though, is that it turns out founder Jack Dorsey never really planned this. His initial goals were much more modest: help people who were cut out of the mainstream payments business accept credit cards. To that end, Square’s story holds some important lessons about how entrepreneurs trying to solve a simple problem can sometimes find themselves stumbling onto a huge opportunity.
Square’s origin story is well known: Dorsey’s former boss and good friend (and eventual co-founder) Jim McKelvey lost a sale for his hand-blown glass because he had no way of accepting credit cards. The problem was one many people had--the barriers to setting yourself up through conventional processes to accept credit card payments were too high for many people. So Dorsey set about seeing if he could create a better system.
The result was the Square reader, which launched a year ago and which allows just about anyone to set themselves up to take credit card payments. Even you. Planning a garage sale and want to enable people to pay for your gerbil cages and Shawn Cassidy LPs by credit card? No problem. Square's for you.
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