How square develops in China

For square, this product, one of the seniors asked me four questions: this product to solve what problem? There is no demand, need to seek how big, what scene has this demand? What is the difference between China and foreign countries? What are the key issues to focus on? After asking these questions, I was a little confused, Then after I had an emergency study of background knowledge, I answered the four questions in five parts: first, square products and service analysis; Square in China's market demand; third, Square's localization predicament; the trend forecast of mobile payment.

Due to the lack of in-depth understanding of mobile payment, time is tight, so in some views may be immature or relatively immature, think of not all. Please understand.

Analysis of square products and services

What's Square? It was founded in December 2009 by San Francisco, a mobile payment start-up, founder of Twitter Jackdorsey, which mainly addresses the issue of mobile-end payments for individuals and businesses. There are three main services: Square reader card reader, Pay with square convenient mobile payment, square Register. Square customers (consumers or businesses) use the mobile card reader provided by Square, in conjunction with smartphone use, can be in any 3G or WiFi network state, through the application matching swipe card consumption, it allows consumers, businesses can make payments and receipts anywhere, and save the appropriate consumer information, Thus greatly reduces the credit card consumption payment technology threshold and the hardware demand.

Give an example of a more realistic sense of square service:

Merchant: KFC Registers an account with the square website or app and applies for a free square card reader, inserting the card reader into the headphone hole and opening the square application.

Customer: When you are walking in the street, and the belly is very hungry, then mobile application received a promotional message from KFC, told you now only 6 yuan can buy Orleans roast chicken leg. You can accept purchase advice on your phone and pay for it. Next, you only need to go into the KFC, in the clerk compared to the computer photo confirmation is I (in advance in the application of their own account, name, bank account, etc.), you can take a long prepared burger left.

It is reported that the number of mobile payment transactions processed by square each year is as high as $4 billion, and that customers charge a transaction service fee, currently 2.75% of each turnover. The company valued nearly 3.25 billion dollars after completing the D-round financing, and Square began a global expansion, with the first leg of its expansion in neighboring Canada.

Square in China's market demand

At present, China's small and medium-sized enterprises, micro-enterprises, a large number of self-employed, many of which do not meet the use of POS machines, such as a boutique in fashion, consumers can pass the square card reader card to pay.

As far as I know, at present there are 60 million ~7000 million large, small businesses and micro merchants (small businesses and micro-commerce, I will be referred to as "Chinese grassroots shopkeepers"), but only 3 million of the merchants have a POS machine.

For small businesses, banking services are difficult to cover and the use of POS is costly. The bank to the Merchant free installation POS machine, but the merchant needs to pay the deposit of 500~1000 yuan, if the turnover is below a certain standard, still need to pay an annual fee, each transaction also must charge a certain proportion of the handling fee, the proportion varies by industry.

To solve the problem of Chinese grassroots shopkeepers not to allow customers to swipe cards, this is a huge market gap, Square offers a solution is, as long as a smartphone or tablet, plus a card reader, can be anywhere to collect and pay. Its advantages are lower than the cost of wireless POS and online payment, and can also provide value-added services. Another popular thing is that Square supports iOS and Android systems, and if you're a seller, with a smartphone and other smartphones in your hand, this card reader will turn into a mobile POS to make it easier for your customers to pay offline payments.

In addition, for consumers, it has been greatly facilitated, as I mentioned in the 1th example of the purchase of KFC.

The localization dilemma of square

Square into China, will inevitably face the acclimatized, because China's social environment and the United States are diametrically opposed to the social environment, consumer habits are not the same, square localization will face at least a few difficulties:

1. The penetration of smart machines is a bit stronger

According to the Research institute IDC published "China Mobile Phone market quarterly tracking report (second quarter 2012)" (hereinafter referred to as the report), the second quarter of 2012, China's mobile phone market overall shipments of about 86 million, year-on-year growth rate of 10.4%. Smartphones, which grew 25 in the last quarter, accounted for 51.3% of the overall mobile phone market, surpassing the mobile phone for the first time. According to the distribution of domestic mobile phone customers, it is estimated that the penetration rate of smart phones in the one or two-line cities is very high, but we know that square is mainly for small businesses, then China's two or three-line cities, and even small towns, if the Chinese small business owners are not using the smart machine, The promotion of square is very difficult.

2. Cottage version of the intelligent machine and the level of the grassroots shopkeepers

China's cottage intelligent machine, has been deeply paid by the customer group is not strong, such as migrant workers, self-employed and so on, cottage intelligent machine to this part of the customer group to the new experience, but in many cases, some shanzhai intelligent machine performance is poor, it is likely not to support the square card reader. At the same time, customers who are willing to use cottage smart machines Many are those who are not highly educated in the community at the grassroots level, this part of the client for the operation of the smart machine is not very skilled, square needs to register some of the online registration and other seemingly simple process, perhaps in their eyes, or appear to be somewhat complex, Poor operation ability.

3.3G and WiFi charges are higher

Square must be in the 3G or WiFi network state, in order to carry out credit card consumption, but then faced with a problem, that is the problem of network tariffs. In China, only iOS and Android smartphone can connect Wi-Fi network, the 3g/wifi network mainly according to the traffic or Internet time billing, this fee for the grassroots shopkeepers is not a small burden. The following China Telecom sky-wing broadband wireless WiFi fee Standard Introduction:

If according to the Chinese basic store one months business hours 30*8=240 hours, that is, square one months 240 hours to maintain online status, the sky Wing offers 300 yuan package is not enough for the grassroots owner to use. If the sky wing of the 300-yuan online package can meet the needs of grass-roots shopkeepers, but this let the grass-roots shopkeepers pay more than 200 yuan per month (assuming that the original owner of a monthly cost of the highest also does not exceed 100 yuan). If so, China's grassroots shopkeepers would rather give up new-born square.

4. Handling fee 2.75% a little high

What is the idea that square's profit model is that it will charge 2.75% of the transaction as a transaction fee? In the eyes of the grassroots shopkeepers in China, this means that I sell 100 yuan each, Square is going to take away 2.75 yuan, this is difficult to accept for Chinese grassroots shopkeepers, because we are shouting business difficult to do, the profit is thin, in some industries, the profit margin is very, perhaps less than 5%, rely on is small profits but quick turnover, now Square will take away 2.75%, It is estimated that most of the Chinese grass-roots shopkeepers will not agree. China's grassroots shopkeepers are more willing to trade cash and will not use square, which is expensive and "inconvenient".

5.square needs to face the Chinese security environment

Square's rival, VeriFone, has tried to lead customers to dislike Square because the square's card reader is unencrypted when it passes the credit card number from the reader to the application. But at the beginning of this year, Square announced a new encryption module in its card reader, allowing the hardware and software to pass the credit card number in encrypted form. This also shows that security is a significant factor for mobile payments. However, the security of mobile payment is still not perfect, as far as I know, there are many free wifi in the country, if customers use the unknown WiFi login account and enter the password, it is likely that wifi interception of these secret data. In addition, in our view, Square's payment method is too convenient, so that consumers lack of security. In China, even phishing sites can be a high-profile security environment, if the lack of a strong enough security system, consumers cannot help but worry about someone to use their identity information to do some illegal activities.

China's grassroots small shops, many consumers may be difficult to accept in a small shop can be carried out without card without a secret trade, because security is difficult to guarantee, and small shop is just Square's main customer base.

6. Develop customer habits

Accommodation or catering to customer habits, in accordance with customer habits to develop products, perhaps should be a shortcut, but this does not mean that we can not cultivate customer habits. The problem is here, changing customer habits, and cultivate customer habits, this is a big project, the need for a certain period of time, and the cost is very high, perhaps a higher probability of failure. Square is actually going to change the petty cash deals of Chinese shopkeepers to receive the square model, but how much is the drive for Chinese grassroots shopkeepers to change their cash-trading habits? To promote the trading habits of Chinese grassroots shopkeepers, The biggest driving force should be the use of square to bring in the source, increase sales, otherwise the other is white.

7. Need support from banks, operators, etc.

Square is moving into China, and if Square's Chinese imitators say they can work more effectively with banks and carriers, it will inevitably face policy barriers if it is to enter China. Because square also in some way also plays the role of third party, need to work with China's major banks and network operators, the cooperation here is difficult.

8. Card Reader's Free Application

In the United States, Square is free for anyone and merchants to apply for the square card reader, and Americans may take it on demand. But in China is completely another scene, may be a person trying to request a number of card readers, or everyone herd to apply, but the card reader to get the hand, see a fresh, nothing dry, the Chinese people is a large population base, it is estimated that square will have to be dumbfounded.

9. Domestic credit card consumption is not universal

Because the use of domestic credit cards is not widespread, there are a lot of dead cards, the real effective consumption of cards only about 70 million to 80 million, and the public credit record storage is not perfect, consumers do not really establish the use of credit card consumption habits, so the square model in China is difficult to really copy.

Four, square in the Romans

In fact, the domestic and square similar products, has been a few, the current market has been the music brush, Lakara mobile card reader, Chanfong, quick brush, box payment, purse treasure and so on. The problem for square may be that it has yet to expand its business to China and that the Chinese market has already been preempted by his copycat followers. Just like the originator Groupon set up a group buying model, when it entered China, found no market space in China, because its Chinese imitators have done the market rotten, even if it did a bit of struggle, but finally sadly ended.

If the Chinese version of Square is to open up in the Chinese market, there are at least a few things to improve:

1. All Free handling fee

Chinese customers are accustomed to free mode, the application of fees are often not seen, 2.75% of the fees for the Chinese grassroots shopkeepers, is difficult to accept. If square can bring consumers and grass-roots shopkeepers to the convenience of the full fee-free temptation, can attract a number of customers. So how can square make a profit if the fees are free? I assume that if the square is free of charge, it will take a week for the square to return to the local owner's account (in the United States, Square is generally the second working day of the transaction rebate), Square can take up as much as a week and gather less, and when Square's model forms a stable cash flow, it can lend money to banks or other low-risk institutions to get interest income. In addition, if the grass-roots shopkeepers do not accept the conditions for a return in a week, then a 1% handling fee, roughly the same as the rate of self-service withdrawals at bank ATMs, may be of some appeal to the grassroots shopkeepers.

So in the handling fee, can give customers two ways to choose.

2. Take advantage of features

In fact, although there are many payment products in the Chinese market, but the positioning of each product is not the same, the line online on the remote payment such as Alipay is actively developing offline payment, as a mature product, Alipay has the technical ability and ambition to do this extension, and this extension is necessary. But as a late-stage show square at the beginning can not be a big, but online payment on the continuous improvement and innovation, in order to more meet market demand, when the offline payment maturity, and then consider entering the line to pay.

3. Card Reader Application

I found that some square in the domestic imitators, such as Chanfong, is to customer sales, the money side of the price is about 200 yuan, I think in the customer did not know your things are good to use, the first charge to the customer, should be a blow to the customer's enthusiasm for using products. In order to encourage customers to apply for card reader, while not the reader is wasted, combined with China's social environment, it may be possible to use to allow customers to buy first, such as 100 yuan to buy the card reader, but promised to refund the customer, such as the grassroots shopkeepers in the purchase of a card reader after a period If the handling fee is 1%, then Square will deduct a fee of 100 yuan less.

V. Trend forecast of mobile payment

Domestic is set off the tide of mobile payment, mobile payment seems to usher in an unprecedented explosion of growth, financial institutions, operators, Third-party payment platform are eager to this huge market. So I'm also predicting the trend of mobile payments as follows:

1. The first advantage of Alipay

Recently, there is news that Alipay has developed a similar square of the card terminal, and similar products are different is Alipay use of fast payment channels, without UnionPay, so do not need to enter a password. At present, the equipment is only testing phase, whether it will be put into the market is still unknown.

Alipay is already the overlord of long-distance payments, and of course it may still be paid in the near field, even in square. Alipay is relying on the huge ecological development of Taobao, resources are not rich, has accounted for the first advantage, but the square is mainly facing offline businesses, and Taobao's ecological circle is also difficult to migrate to the offline, so for Alipay, Square is also a strange market.

2. Micro-letter + Tenpay

Micro-letter is very fierce, on the line in just a few months after the popular China, micro-letter shake and sweep a sweep function, to micro-letter business profit provides a huge space. I was thinking, if tenpay and micro-letter combination, what will be the scene? Tenpay is combined with lbs, and the micro-letter circle of Friends is easy to be a share of the shopping, if the micro-letter in the design of some improvements, micro-trust by virtue of its large social customer base and high customer stickiness, The integration of online payments and offline payments may also be an important trend in future mobile payments, and I think "micro-letter + Tenpay" is the most potential in the country to become the square model overlord.

3.360 Mobile phone security Guardian + mobile payment

360 Mobile phone security guards and mobile payments linked together, how much seems to be a bit unreasonable, 360 is the location is the Internet security, how can you do mobile payment? My starting point is 360 to do Internet security, is its best entry point, which is different from the advantages of competitors, do Internet security enterprises, Making mobile payments, of course, will pay more attention to security than other companies, which makes it easier for customers to get close. Another 360 mobile phone defender is the second largest customer base of the mobile phone client, if 360 mobile phone guards on a small plug-in, I believe can quickly promote mobile payment.

However, in my opinion, 360 cannot do mobile payments alone, either with startups that have already done mobile payments, or with startups that are preparing to make mobile payments, to buy them over, or to inject money into their investments, to collaborate to develop new mobile payments, And the use of 360 of large product lines to promote.

4. Multifaceted

In the next few years, China Mobile will pay the high speed development period, in addition to the above three companies, other companies have their own opportunities, such as box payment products are also very grounded, but in 3-5 years, the market will leave only 3-5 mainstream mobile payment products, other payment products will be phased out.

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Author: @ Mo Mo, Senior year, mailbox Tongqingpan@yeah.net