Visa Invests in Square

Stake in Square signals Visa’s move as a major player in the mobile payments landscape.

February 15, 2016

NEW YORK – Visa could be making Square everywhere you want to be. The credit card giant now owns a 9.99% stake in the class A shares of Square, a mobile payments startup co-founded by Twitter CEO Jack Dorsey.

CNN Money reports that investing in Square signals Visa’s move to be a major player in the mobile space, giving it “a leg up on MasterCard.” However, Square is situated in an already-crowded space, with the likes of more established payment processing firms such as First Data and PayPal, as well as tech giants such as Amazon, Google, Apple and Facebook—“which would all love to get a bigger piece of the growing mobile payments market.”

In 2012, Starbucks formed a partnership with Square to provide processing for all credit and debit card transactions at U.S. Starbucks stores. However, when Square filed its IPO in late 2015, it revealed losses of $71 million from processing Starbucks payments during a three-year time span, CNN Money reported. In fact, the “vast majority of Square's transaction costs” had come from fees “paid to Visa, MasterCard and other credit card companies,” noted the news source.

In October 2015, Starbucks announced that J.P. Morgan Chase & Co. would be processing payment transactions previously processed by Square Inc., while mobile transactions would continue to be serviced by First Data.

Square, which went public in November 2015, hit the market in 2009 as a device that plugs into smartphones and tablets and allows merchants to accept credit or debit card payments.

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