Square finally opens for business in the UK, its first market in Europe – TechCrunch

Almost a year after setting up a UK business entity called Squareup Europe, today the payments company Square is officially opening up for business in the UK, marking its first move into Europe and its fifth country after Canada, Japan, Australia and its home market in the US, with a service that turns ordinary smartphones and tablets into point-of-sale payments devices. Brexit and all the questions of what it will mean to the British economy and its technology industry be damned?

Square will sell a £39 Square Reader, a piece of hardware that connects by Bluetooth to your phone or tablet to turn that device into a payment card reader. And in addition to selling the reader, Square will take a 1.75 percent cut on all in-person transactions, and 2.5 percent for any sales made online, by phone or electronic invoice.

The news was announced this morning at an event in London with Square’s CEO Jack Dorsey (who is also the CEO of Twitter) at an event at the Soho Piano Bar, one of Square’s first customers here. He said that the company would focus more on targeting small and medium businesses that have yet to take card payments of any kind — estimated to be account for half of the 5.4 million SMBs in the country.

“There are a lot of folks here who haven’t been reached yet,” Dorsey said in a presentation this morning. Amidst a market full of a number of existing competitors in the area of mobile payments, he also noted that Square’s quick turnaround for payment processing was one unique selling point. “You’ll have access to your funds the next business morning.”

He also added that Square was interested in adding more financial services, such as Square Capital for cash advances, soon, and it was also considering entry into more European markets before adding on other services like its food business. “We still have a long way to go with Caviar in the U.S.,” he said.

This is not Square’s first foray into business in the UK. Back in 2014, we spotted that the company’s point-of-sale software Register was quietly launched globally to allow people to take virtual payments, but this hasn’t been actively promoted as a business. In an interview, Sarah Harvey, who is heading up Square’s efforts in the UK, would not disclose how many businesses are using that currently in the UK, nor how much money it is processing here.

A more formal entry into the UK, however, has been a long time coming.

Square, which launched in 2009, originally made its name by offering an easy way for small businesses to take card payments by creating a phone or tablet app that worked with a small piece of hardware, made and sold by Square, to transform those consumer devices into card readers and processors. Square marketed this specifically to those who didn’t take card payments previously and/or found buying traditional equipment and paying bank fees too expensive.

That is a service that had a ready market in the UK, too. In addition to millions of small and medium businesses and millions more sole traders, the UK has a population of consumers that prefer to pay by cards: the average consumer carries only £25 and 70% of all transactions are made with debit and credit cards.

So unsurprisingly, in the years between Square launching its services in the US in 2009 and today, a number of other companies have sprouted up to sell similar services in the UK, including iZettle, PayPal, SumUp and more.

In other words, the market for stealing customers from existing, established companies is tight, and the number of businesses who take no card payments at all (late adopters) is smaller: it’s estimated that about half of the UK’s small enterprises do not accept card payments today.

Some believe that Square has, in fact, already missed the boat for making a splash in the market.

However, if you look at other businesses in the world of tech, it’s not always the first movers who are the winners (just look at Apple and the iPhone as one example). That was a sentiment echoed by Dorsey today who said it’s not about being first, “but being the best.”

We’d heard from more than one source Square had actually weighed up acquiring rivals as one route to entering the UK.

But the strategy Square has taken to go organic is, at least for now, a far less expensive way to try things out. Accounts from Companies House show that Square has to date invested less than £4 million into the operations up to now to build the business. By comparison, acquiring a rival like iZettle could have cost the company several hundreds of millions of dollars.

iZettle is (so far) positive in the face of more competition. “We’ve been waiting for these guys to arrive for a while now. We’re happy they can join us here, as healthy competition always moves a market forward. We’re fans of anyone who can help us level the playing field in the massive effort needed to democratise commerce for small businesses in the UK,” said Jacob de Geer, CEO and founder of iZettle. “We are actually surprised it took them so long to get involved and believe they have some catching up to do. We have five years worth of data and understanding of the UK market, and we know from experience that the UK is a different beast to the US. We’ll be watching them closely, and with interest.” 

What will be interesting to watch is not only whether Square manages to gain traction with its late entry into the UK market, but what else it chooses to bring here alongside the payments services.

Square in the U.S. has been moving beyond payments enabled by a mobile phone or tablet, into more specific industry services like food ordering and delivery; as well as cash advances, invoicing, API access for on-site integrations and other services for businesses.

In its last earnings, Square noted that “new products” launched since 2014 represented 25 percent of its adjusted revenues for the quarter. Harvey would not comment to me on when and if Square planned to introduce services like these in the UK, nor whether there were plans to expand to other markets in Europe.

Revenues at the company last quarter increased 35 percent, to $402 million in the quarter. Subscription and services-based revenues grew 81 percent, to $41 million in the same quarter. Hardware sales, which represent the smallest portion of its revenue mix, grew to $8.9 million as more vendors continue to upgrade to contactless and chip-card readers.

Square finally opens for business in the UK, its first market in Europe – TechCrunch