" class="no-js "lang="en-US"> EXCLUSIVE: ‘Innovating out of a crisis’ – Kaushalya Somasundaram, Square in ‘The Fintech Magazine’
Thursday, May 30, 2024

EXCLUSIVE: ‘Innovating out of a crisis’ – Kaushalya Somasundaram, Square in ‘The Fintech Magazine’

When it comes to solving problems, Square [literally] wrote the book on it! So it wasted no time coming up with solutions to challenges during the pandemic, says Kaushalya Somasundaram, Head of Payments Partnerships & Industry Relations at Square UK Kaushalya Somasundaram, Square | Fintech Finance

We all think we know what ‘innovation’ means, but do we… ? Four-sided ‘wheels’ to pull carts (squeels, perhaps?) would have been an innovation if some bright spark hadn’t struck on the idea of scaling up a potter’s wheel – and only then after potters had been watching them go round for 300 years. The point is, what’s the use of developing something new, if it doesn’t fulfil a real need?

In business terms, innovation is often incremental: identify a problem, solve it and address the next one that becomes apparent as a consequence of the problem you’ve just fixed. At least, that’s the embodiment of the approach taken at Square, the financial services and digital payments company.

The brainchild of Twitter co-founder Jack Dorsey and multi-entrepreneur (and professional glassblower) Jim McKelvey, who wrote a book on it, Square was born in 2009 to solve an issue encountered by McKelvey, namely that he was unable to complete a $2,000 sale of his glass products because he could not accept credit cards. To put it simply, small businesses like his, often not on the high street, needed mobile payments but there were too many obstacles in their path. Square’s first product was the Square Reader, which accepted credit card payments by simply connecting to a mobile device’s audio jack. Previously, credit card machines would only work with grounded connections, but this innovation allowed merchants to break free of outdated technology and trade wherever they wanted to, for a transaction fee of 2.75 per cent.

That solved their problem but the format didn’t work for all businesses. So, next came the Square Register, a product launched in 2017 that transformed the iPad into an all singing, all-dancing point-of-sale device. From handling $1billion in annual micromerchant payments via its phone Reader, Square entered the restaurant space and sales of $12billion followed.

It now offers services such as a dashboard, employee management and payroll, each addressing a problem for its customers that became evident as the business evolved. But then came the biggie. A year after the pandemic redefined our concept of what a problem is, Square produced a report for every country it operates in, highlighting the impact of the crisis on merchants and its own operations. In the UK, it showed the number of businesses accepting online payments with Square had nearly doubled; at least 40 per cent of businesses giving up using cash altogether in just 12 months.

The pandemic clearly wasn’t something in Square’s gift to solve; but its methodology meant there was a clear course to take. In an interview he gave about his book, The  Innovation Stack: Building An Unbeatable Business One Crazy Idea At A Time, published just as the pandemic took hold in 2020, McKelvey reflected on the huge difficulties created by a global health crisis.

“Most of the world-class CEOs I studied for the book were thrown into horrible situations and figured out how to thrive… they woke up in a burning city quite by accident and somehow figured out how to deal with it. “That’s what we need to do,” he said.

Small business owners have been dealing with that ‘burning city’ scenario over the past year, resulting in – through necessity – digital transactions becoming the ‘new norm’. Square recognised the problems yo-yoing restrictions and uncertainty surrounding COVID-19 created for merchants, and responded, during 2020/21, by introducing new hardware and software solutions across its territories. Notably, there was Online Checkout. Rushed to market so that businesses suddenly finding themselves having to trade remotely, could, it allows sellers to accept payments by sharing a simple social link.

“We focussed on bringing new tools to the market so that merchants could continue to run with the changing guidelines that were imposed by the Government, initially, and then changing customer preferences,” says head of payments partnerships and industry relations at Square UK, Kaushalya Somasundaram, who joined the team at the start of the crisis.

“Shoppers have preferred to limit their personal contact, so accepting digital payments has become essential for merchants. Payments through our Square Online Store [which allows merchants to build an online store for free] increased five-fold at the start of the pandemic.

And, since last April, we’ve seen a 15-fold increase in digital payments compared with January. That’s, a massive, massive increase,” says Somasundaram. The majority of businesses have maintained their new modus operandi, which, incidentally, has also been good news for Square’s Cash App, a peer-to-peer payment application that is linked to a debit card or bank account and allows for direct payments to and from individuals and businesses.

“It’s fascinating to see businesses pivoting to adapt to a new world,” says Somasundaram. “We’re now seeing sellers selling to customers who have themselves moved to the new way of purchasing. Many businesses feel that online businesses are more accessible to customers, as well as being more convenient for themselves.”

Rise of the omniseller

In July 2020, Square integrated On-Demand Delivery to its Square Online Store for sellers to dispatch a courier through delivery partners for orders placed directly on their websites – another quick solution to the challenging environment in which retailers found themselves. That doesn’t mean Square is moving away from its roots in communities of small, face-to-face retailers. Rather, it sees more of them taking an omnichannel approach, says Somasundaram.

“Let me give you an example. One of our sellers, Mrs Mac’s Sweet Treats, is a cake shop based just outside Milton Keynes, UK. When they started the business, they were only selling from a small shop in the local community. At the start of the pandemic, around about April, they went online, and within the first five minutes of going online, they took something like 300 orders. Now they are delivering to customers nationally. This is just one story of how the landscape has changed.”

A Square In-App Payments software development kit (SDK) was recently added so that merchants don’t even need to use its Readers to take payments via Square. The addition of  in-app mobile payments to the Square platform, gives developers access to a complete, omnichannel payments solution, allowing sellers to manage payments in-store, via mobile and online in one place. Together with improvements to its Cash App, it’s an example of incremental innovation that doesn’t just solve a problem for merchants, but also advances any ambition Square might have to rival payment platforms that don’t have the same solid relationship with bricks and mortar merchants that it enjoys.

‘can-do’ approach

In the UK, it isn’t just the hurdles created by the pandemic that Square’s had to overcome. Another potential existential threat for merchants was the revised Payment Services Directive’s (PSD2)requirement for them to introduce Strong Customer Authentication (SCA). This mandates that sellers in the UK and Europe use two-factor or multi-factor authentication to double-check a customer’s identity when required by a card issuer. The danger, of course, in introducing another step to a purchase process, is that, if you complicate the transaction, customers will talk with their feet and leave the online checkout.

Somasundaram says Square has taken this challenge of balancing compliance and customer satisfaction in its customary, ‘can-do’ stride. “It’s a really well-intended regulation to make payments more secure and reduce fraud. So, with that in mind, the experience is something I feel players in the payments industry should be able to solve. Right? And I’m confident we’ll make it more seamless, and more secure. One way to do that is to make use of the PSD2 exemptions that are available for us in maintaining the low-risk threshold. So, we have to strive to get the risk thresholds lower, but through that, one can very intelligently leverage the transaction risk  analysis(TRA) exemptions and therefore reduce the friction. We are also looking at biometrics and other frictionless authentications, to meet the SCA requirements. Tokenisation, for example, is one way of ensuring that we can get the delegation authentication right.” So, the company’s innovation pipeline has been pumping overtime to keep businesses alive during the pandemic, and Somasundaram says it has one, clear aim.

“Everyone should be able to participate in the economy, and every merchant should have access to the same tools and services,” she says. “For us, that means trying to bring true innovation to all merchants, regardless of how big or small they are. So, all of our products are opensource, in particular opensource software, and we continue to support open technologies. Most recently, we launched our In-App Payments SDK, and our App Marketplace, which has been around for a while, again demonstrates our commitment to giving sellers choice.

“We strongly believe that any platform must reflect the variety of experiences and verticals that sellers are offering and operating in. It’s not just a one-size-fits-all. And, in the UK, we are really excited by the fact that we have more than 80 technology partnerships, with some best-in-class companies. All of this follows a principle of meeting the diverse and specific needs of sellers.

“We innovate to make the payments experience seamless, giving our sellers choice and flexibility. This has been, and will continue to be, our key driver.”


This article was published in The Fintech Magazine #20, Page 18-19

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