This week, my firm is beginning to implement credit card payments via Square. I have been following Jack Dorsey since he rose to prominence with Twitter. I believe that Mr. Dorsey will be one of the entrepreneurs who push the global economy forward over the next decade. He has managed to make complex concepts simple, whether via the 140 character limit of Twitter or the straight-forward pricing approach of Square.
Because of Square, small businesses no longer need multiple banks charging them (us) inexplicable and exorbitant fees to accept credit card payments. I hope that Square's approach will disrupt the credit card processing industry. Disruption innovation is a term of art coined by Clayton Christensen, a professor at Harvard Business School. It is defined on his web site to mean "a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors." Disruption is discussed at length in Professor Christensen's book, The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. A classic example of disruption is the personal computer industry disrupting the mainframe computer industry. Disruption is often marked by smaller profit margins for businesses accompanied by massive benefits for consumers (such as quality products at lower costs.)
The best companies will often try to disrupt their own products before other companies disrupt them. Apple did not hesitate to produce the iPhone, even though doing so effectively killed ("disrupted") its lucrative iPod business. Philip Elmer-Dewitt provides an excellent analysis of this on his CNN Money/Fortune blog. Companies must be wary of becoming too reliant upon any one product, as it makes them ripe to be disrupted by an upstart.
I hope that Square will force banks to re-think their approach to credit card processing and the expenses that they charge small businesses. If Square does disrupt the larger banks, it will benefit small businesses, which in turn will benefit consumers.