Square announced this week that it has launched its business in the U.K. But does its timing mean that it’s already shut out of a competitive market?
Rick Oglesby doesn’t think so. Oglesby is principal of AZ Payments Group and a partner of Double Diamond Group, and he’s bullish on Square’s prospects.
“The U.K. market is an important entry for Square because it’s Square’s first major launch in a chip and pin market,” he said. “It’s doing so with the same reader that it uses in the U.S., and with a software-based PIN entry pad. That’s harder to do than you might think, and it creates a competitive advantage for Square because it can dramatically reduce the merchant’s up-front costs when signing up for a merchant account.”
A software-based solution will be less expensive to scale than traditional devices that require certification against industry security standards, Oglesby said.
Square said it will sell its reader for £39, and charge U.K. sellers a fee of 1.75% for in-person transactions and 2.5% for all others, such as payments taken online or by phone.
The company is entering a market that already has its share of competitors in the space. PayPal offers its PayPal Here card reader and iPad app in the U.K.
And Stockholm-based iZettle, which has a leading presence in the U.K., hasn’t been shy about commenting about Square’s arrival.
In a statement to TechCrunch, Jacob de Geer, CEO and founder of iZettle, said of Square’s entry, “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 U.K. market, and we know from experience that the U.K. is a different beast to the U.S. We’ll be watching them closely, and with interest.”
Oglesby thinks Square’s entry will indeed be something to watch.
“Square’s impact will immediately be felt, as it’s entering the market with the lowest cost hardware and a lower card processing fee (1.75% vs. competitive rates averaging 2.75%), economies of scale on its hardware that should create a significant advantage versus its competitors,” he said. “It also has a deeper suite of products that it can launch in the U.K. at a later time, and more capital to invest in branding, sales, marketing and acquisition efforts.”
Square said that U.K. consumers typically carry less than £25 in cash, and more than 70% of them prefer to use cards. It also said that half of the region’s more than 5.4 million small businesses do not yet accept cards.
“It’s not too late,” Oglesby said. “Square can definitely win in the U.K., and if it can prove the model in the U.K., it will have a solid blueprint for other chip and pin markets.”
Square made its announcement at an event at Piano Bar Soho, a local business that is already using the company’s card reader.
According to Reuters, the company laid the groundwork for a move here last year with the creation of a London-based entity called Squareup Europe. The U.K. is Square’s fifth market, behind the U.S., Canada, Australia and Japan.