“American Banker” names Square’s Jack Dorsey Innovator of the Year, praises impact on payments space

It’s hard to run two companies, especially when they’re both some of the tech industry’s most popular ones. But Jack Dorsey has done it and has succeeded — very impressive for the co-founder of Twitter and Square.

In the book “Once You’re Lucky, Twice You’re Good“, author and journalist Sarah Lacy explained that first-time entrepreneurs that exited were “lucky”, those that created multiple exits were “good”. In Dorsey’s case, he has managed to cast himself as the latter, doing both endeavors almost simultaneously — and he’s helped changed the way we communicate, and also transact.

People have started to pay attention, not just in Silicon Valley. Today, American Banker magazine named Dorsey its Innovator of the Year because of what he’s done with Square. As the publication points out: “technologists are obsessed with it. Banks have invested in it. And unlike most mobile payments products, customers are actually using it.”

Explaining the award

According to American Banker, what Square and Dorsey have done has had tremendous impact on the way the world perceives payments:

Small businesses that never before accepted credit cards, from popcorn stands and coffee shops to PTA boards and taxi drivers, are now swiping customers’ cards through Square devices—and quietly helping the banking industry’s long war against cash in the process. An August deal with Starbucks will aggressively expand Square’s power and presence, giving its digital wallet a national foothold in one of the only stores where customers regularly pay with their phones instead of their credit cards.

Dorsey said that he was “honored and humbled” by American Banker’s recognition.

A mobile payment card reader everywhere you turn

It seems almost each week, someone new is coming out with the latest thing to rival Square, whether it be PayPal Here, Google Wallet, Intuit’s Quickbooks GoPay, VeriFone’s SAIL, PayAnywhere, or several others. Any why wouldn’t they want in on this explosive market?

CNN did an analysis of what’s in play and it says that there’s millions of merchants to discover, billions of transactions to be processed, and trillions of dollars in commerce on the table. And it’s not just technology companies that are exploiting this trend: the big phone companies like AT&T and Verizon, credit card services, and many others — all for the chance to leverage the mobile device as a cheaper, easier, and more efficient way to process payments.

Forrester analyst Thomas Husson has said previously that “mobile is opening a bridge between a physical and digital world because these devices are in everyone’s pockets. Mobile payments is a very fragmented industry, there are so many different subcategories when it comes to payments.”

High valuation, but probably proven it’s worth it

American Banker magazine said that Square has a reported valuation of $3.25 billion and that it might not live up to the hype, but based on what the company has done in the nearly four years since it was founded, Square has become a truly disruptive form of technology that has found a way to succeed when other financial institutions have “struggled to innovate in the increasingly fractured payments industry”.

Companies are using it, and it’s definitely a hit with small businesses, freelancers, and anyone who doesn’t have the time or the resources to invest in complex and traditional systems. Just this month, it announced that it’s processing $10 billion in payments annually — an impressive feat since two months prior, it had exceeded a 12 month run rate of $8 billion.

Not one to simply allow small businesses, street vendors, and independent artists have all the fun, Dorsey has set out on a plan to expand Square’s reach and, as previously mentioned, has secured a landmark partnership with Starbucks where it would will be processing all credit card payments in the coffee shop’s 7,000 stores in the United States.

Additionally, to help better connect people with businesses using its card reader, in October, Dorsey launched a search engine to allow users to “shop by location and specific items”. With over 200,000 businesses listed, it’s helping customers better discover new places that can easily be paid using just a credit card (or paid through Square Wallet). It only made sense because after all, what good is selling a device to a business and not helping it be found?

If you can’t beat them, join them

To date, Square has raised $341 million in funding from well-known investors and entrepreneurs in the technology industry such as Khosla Ventures, CrunchFund, Yahoo’s Marissa Mayer, Foursquare’s Dennis Crowley, Google Venture’s Kevin Rose, First Round Capital, SV Angel’s Ron Conway, Twitter co-founder Biz Stone, Shawn Fanning, Sequoia Capital, Kleiner Perkins Caufield & Byers, and more.

Those aren’t the only investors — non-tech entities have also gotten involved with Square, including Starbucks (naturally), Visa, Virgin Media’s Richard Branson, Rizvi Traverse Management, and Citi Ventures.

One would think that Square would be rivaled by services provided by Bank of America, Visa, or Citigroup, but it doesn’t appear that it’s being affected at all by it — perhaps because its competitors are coming from the traditional payments space and with Square, it’s more about simplicity than process.

There’s still room for others in the market

While being named Innovator of the Year is a great honor, one hopes that Square doesn’t take this to mean that it has won the payments space, because it hasn’t…at least not officially. Every few weeks or months, you can probably expect someone to have a new take on how to process transactions, like what potentially PayPal might do when it bought Card.io to capture credit card information using a camera, or Groupon’s use of point-of-sale technology company Breadcrumbs and mobile payments service Kima Labs.

With dozens of similar services out there, it will be up to the public to figure out which device makes their lives easier and reduces the friction that consumers often experience (e.g. expensive fees).

Until then, Square has certainly helped define the mobile payments space. Intrepid Ventures’ consultant Eric Grover says that with its device, the company now has a “beachhead with consumers”, something he believes that retail banks should be watching out for.

Main image header via Square

Image of Jack Dorsey via Brian Harkin/Getty Images