How Jack Dorsey's Square Is Accidentally Disrupting The Entire Payments Industry

The new payment system that Squarelaunched todayis going to have a profound effect on how people pay for stuff in the real world—perhaps as profound as the iTunes store has had on the distribution and sale of digital media. And in the process, it will likely upend the entire payments industry.

The interesting thing, though, is that it turns out founderJack Dorseynever really planned this. His initial goals were much more modest: help people who were cut out of the mainstream payments business accept credit cards. To that end, Square’s story holds some important lessons about how entrepreneurs trying to solve a simple problem can sometimes find themselves stumbling onto a huge opportunity.

Square’s origin storyis well known: Dorsey’s former boss and good friend (and eventual co-founder) Jim McKelvey lost a sale for his hand-blown glass because he had no way of accepting credit cards. The problem was one many people had--the barriers to setting yourself up through conventional processes to accept credit card payments were too high for many people. So Dorsey set about seeing if he could create a better system.

The result was the Square reader, which launched a year ago and which allows just about anyone to set themselves up to take credit card payments. Even you. Planning a garage sale and want to enable people to pay for your gerbil cages and Shawn Cassidy LPs by credit card? No problem. Square's for you.

But, Dorsey tellsFast Company, the company was surprised at how many businesses took to it as well, like food carts selling street food and bands selling merchandise at their shows. 

"As they started taking more and more payments, they started getting bigger and bigger, as you’d expect them to,"he says."They were beginning to get more sophisticated about what they needed, and they started asking us for more tools."

At the same time, Dorsey says, the iPad was emerging on the scene, providing more real estate to work with on than on the iPhone. Which got Square to thinking about a complete point-of-sale solution for businesses, rather than simply a reader for individuals.

This is where Dorsey’s design sense kicked in. Dorsey wasn’t interested in simply providing a direct replacement for existing point-of-sale systems. He wanted to revamp the entire payments experience--making it simpler and, as COO Keith Rabois puts it toFast Company,"more delightful."

"That’s how we think about our strategic goals,"Rabois says."We’re using software to create magical experiences."

Square started thinking about receipts: Why should you get a paper receipt for a credit card--a digital--transaction? Why shouldn't the accounting be sent to you electronically? And what about all the data that gets recorded in the transaction: What you buy and when you bought it? Wouldn’t both the vendor and the customer be interested in that data, if you could shape and present it in ways that were meaningful to each?

The result is the new system. Not only are payments easier: Customers don’t have to pull out credit cards (or cash) anymore, and vendors don’t have to swipe anything. (A complete description of how it works ishere.) But now both sides are also getting insights and experiences they never had before.

Square is providing an analytics system to vendors so they can track buying patterns and use the information to make adjustments that benefit their businesses."How many cappuccinos did I sell, and how many of those customers bought biscotti?"Dorsey says by way of example."So next week, if I move the biscotti jar, what happens to those sales?"

As for customers, the Square digital"card cases"they carry on their phones (pictured above) allow them to track their entire history with the businesses they frequent. Open up the case,"take out"a card, and there's a list of everything you’ve ever bought from that particular vendor. That, Rabois says, isn't just useful information--it actually forges stronger emotional connections between customers and their favorite stores.

"Payments have been about mechanics and functionality utility,"Rabois says."But now, I have in my phone, the brands and businesses I love most. They’re brought with me every day."

It's easy to see how a system like this might appeal to both vendors and customers. And it's also easy to see how it could become a player in the heated-up"local"space, which has largely focused on"deals"as a means of letting businesses market themselves and get new customers in the door.

And since the new Square system enables some vendor content to appear on customers' phones--for example, customers can see a restaurant's up-to-date menu on their"cards"--the logical next step would seem to be to enable vendors to advertise deals to their customers through the Square system.

Put that question to Dorsey, however, and he challenges the whole concept of deals in the first place.

"I don't think people are necessarily want discounts,"he says."They just want great experiences."

And that, Square believes, is where the real opportunity lies in the payments industry.

"I don't think a lot of financial institutions have spent a lot of time thinking about design,"Dorsey says."Design is not visual. It's about simplifying and getting something down to its essence."

Which is what Square has done as it has reimagined what a payments system would look like in a mobile, connected, iPhone/iPad world. And which is why, just as the iTunes store completely upended the sale and distribution of digital media, Square just might upend the entire real-world payments industry--whether it meant to or not.

Read More:Most Creative People 2011: Jack Dorsey/ Square

E.B. Boyd is FastCompany.com's Silicon Valley reporter.Twitter.Email.

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Web Anonymizers And The Arab Spring

Fast Companyrecently had the opportunity to speak with David Gorodyansky, CEO ofAnchorFree, on the use of his company's popular Hotspot Shield software during the Arab Spring. Although Hotspot Shield is best known as a product used to access services such as Hulu and the BBC iPlayer across national borders, it alsoplayed a crucial rolein organizing uprisings in Egypt, Tunisia, and Libya. Users put a series of web anonymizers to work toaccess Facebook, Twitter, and other servicesduring uprisings throughout the Middle East.

Can you give a short history of AnchorFree?

“We started AnchorFree in late 2005. The idea was to enable free products that millions could use to be secure and private online. We wanted to create a system which is totally private, totally secure, and where the user is in control. As you surf the web, obviously, every site tracks your behavior. Our early users were primarily in North America and Western Europe.

But in 2008, we noticed an interesting trend. People were getting online and using our products in emergent markets. At first, we were wondering what was going on since that wasn't the original intent of our product. But people in emerging markets found another use for Hotspot Shield: Besides being secure and private, it could also bypass any censorship or any blockages in this region. We found out that out of 2 billion Internet users worldwide, more than 600 million live in places that censor the web--primarily in China and the Middle East. That's a serious number. We look at our market as containing 1.5 billion potential users--600 million that are censored and another 800 or 900 million who live in the western world but need private browsing.

Today we have around 9 million unique monthly users who...visit about 2 billion pages per month through AnchorFree Hotspot Shield. We encrypt and secure every page they visit. Users' IP addresses, which are linked to their identity, are thrown out by the service and AnchorFree creates a new address. Even we don't know the user's identity--which protects them from the good guys, the bad guys, and ourselves.

So how then is the advertising on Hotspot Shield targeted?

Advertising is targeted through a series of patents. To summarize the secret sauce, the user's identity remains secret but if they are looking at pages for cars or for furniture, then they could be targeted with car ads or furniture ads.Googlecan target ads with cars or furniture (to the secret user) and so could anyone else. Basically, we anonymize the user's identity but we do not prevent any tracking based on cookies or so on. If a user is really interested in stopping this, they can also turn on private browsing in Firefox or another browser so no one can ever see the searches that they are doing. That's up to the user, but we do make their identity private. Even if someone asked us, we don't know who the user is. But pages can be broken down into categories, and we can target ads according to which of the 2 billion pages users are looking at--we just don't know who the user is.

Can you tell us about how your product is used in regions with web censorship?

During the uprisings in the Middle East--and even before that, during the Iranian elections--whenFacebookandTwitterwere getting all this press for helping people to organize, a lot of people got onto those two services through us. In China, users are able to access any kinds of pages they want through us. We also put 5 million users a month onto Google and 2-3 million a month onto both Facebook and YouTube in regions where those services are censored in places like Turkey and China.

We are also a huge enabler for Skype. The monopolies that control the mobile phone companies in many regions don't like Skype and restrict access to the service in many parts of the world. But for us, we see ourselves becoming a social business that helps people and helps the world. We're fascinated and encouraged by the fact that we are running a consistently profitable business that grows 200% a year in page growth and revenue, but that also makes a very real social impact. We allow users to access information that they normally would not be able to.

Where besides the United States do you have the biggest number of users?

We have users in 100 countries. We have around 1.5 million users in China, many in Western Europe. The Middle East is huge, especially places like Dubai. So far, it's not so much places like Iran (that give mass numbers of users). But Egypt saw a huge jump from 100,000 users to a million overnight during the uprisings. Looking at our traffic, we can see when news is happening around the world. We know when people are sleeping, praying, and eating in the Middle East due to traffic patterns.

So there's a lot of traffic from Dubai and the United Arab Emirates, right?

There is. I think one of the reasons for that is the expat community there. We have another product called ExpatShield that is specifically geared towards expats (who cannot see firewalled sites in the Emirates). But in Libya, Tunisia, and Egypt, our traffic jumped.

We could also see things no one else was reporting. In Libya, we could tell that the Internet would come up in the morning and completely shut down at night. We didn't see that in the press; to the best of my knowledge, no one reported that anyway. We have usage in 100 countries, but nowhere does traffic drop to zero at night--but in Libya, that is exactly what happened. My guess is that they would turn on the Internet in the morning so oil companies would function, but they would shut it off at night so people couldn't organize after work. But that's my guess.

Were there any problems dealing with additional traffic from the Arab Spring?

We didn't have problems dealing with the traffic. We're very well-funded, profitable and scale extremely well. Our infrastructure is distributed in nine data centers around the world and we have a whole team of engineers devoted to scaling infrastructure according to scale. As a result, we didn't cap bandwidth.

Are there any markets you had difficulty working in?

Yes, some places try to block our services. It's interesting--our website was blocked in China, but since then, usage quadrupled. What we found was users emailed the product to each other, so we set up an email autoresponder that would send a message with the product attatched. Hotspot Shield was spreading almost virally, but the censorship was still a pain in the ass, of course.

We had one attack on our servers around two or three years ago, but since then nothing. We go through 2 billion pages a month, which requires huge amounts of servers. In terms of scale, we deal with almost as much bandwidth as eBay. Taking that down would be very hard.

Any plans for the future?

Our plans are to continue growing organically; our goal is to go from 9 million unique monthly users to 100 million. We hope to get there by 2014--that's our real vision. We are also now selling an ad-free paid project in conjunction with Webroot as well.

Note: This interview was edited for length and readability.

{Image: Flickr userAhmadHammoud}

For more stories like this, follow@fastcompanyon Twitter. Email Neal Ungerleider, the author of this article,here.

Read More:Syria's Facebook Wars

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The Federal Government Wants To Help You Name Your Kid

Sure, there are a plethora of baby-naming apps on the iPhone. But how many of them were created by humble bureaucrats toiling away in the deep, dark recesses of the Social Security Administration?

As of this week, one--now that the SSA has released its new app,Baby Name Playroom, which reaches into its databases to serve up the most popular baby names from the past 130 years. It also includes links to troves of useful information on the SSA website, like disability benefits for children and how to file for a Social Security number for your baby. It's cuddlier-looking than one might expect from an app created by a government agency (though we're not sure we'd recommend naming your kid based on its"Shake to get a random name!"feature).

While Baby Name Playroom doesn't necessarily include some of the features other baby-naming apps, like the origins of particular names, SSA CIO Frank Baitman tellsFast Companythat part of the idea behind the project was simply to test drive the app-building process.

"We recognize that the mobile platform is going to be hugely important to Americans--and to government and business to be able to get their jobs done in years to come,"he says.

Braitman should know about looking ahead. A former business-strategy consultant in the private sector, he was once a director at the Palo Alto-based Institute for the Future, helping Fortune 500 clients understand how emerging technologies could impact--and disrupt--their industries.

Part of Braitman's long-term goal is to help the SSA move more services online--and raise awareness about them among the general population. Apps, Braitman says, can help deliver some of those services.

"There are not an insignificant number of people who don’t have access to the Internet, but they have a mobile phone. If that’s the best way to reach them, we want to do so,"he says.

{Image: Flickr userKitt Walker}

E.B. Boyd is FastCompany.com’s Silicon Valley reporter.Twitter.Email.

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5 Tips To Separate Personal And Professional Life Online

"My life and biz is so intertwined in every way that it's hard to make that clean separation on and offline."That's what Candace Alper (@NameYourTuneCDs) said on Twitter when I asked about the importance of separating your personal and business life on Facebook. As an entrepreneur who runs a made-to-order children's CD company, she is comfortable mixing business with pleasure online. Monica Roddey (@MicaR) agrees. She says"my online persona = my 'real life' persona ... what you see is what you get."

I fall into Alper's and Roddey's camp. When I signed up for Facebook years ago, I opened it up to anyone and everyone. Although I now also maintain a fan page, it's still hard for me to refuse friend invites that make their way into my personal account. However, the majority of the responses I received disagreed with this approach. Matt Hall (@mattwiter) writes that"you simply don't combine the two to begin with ... that is a sure mistake."For Kathy Dabrowska (@_katdee), she says"you can't be ON all the time ... you need a place where marketing yourself is not needed."

In theory I agree that separation is a good thing. With more employers lurking on social profiles and more people oversharing online, it just makes sense to keep some things private. However, the reality is that sometimes the tools make it difficult to split up your networks. Here are five tips to help you get closer.

1. Use different networks for different purposes

Jon Lax (@jonlax) uses LinkedIn for business and Facebook for personal. This seems to be a pretty safe and standard approach for a lot of people. After all, LinkedIn just doesn't lend itself to the more personal information that is expected on Facebook. If you do this, it's important to warn people in your professional life who are expecting to be accepted as a Facebook friend. In other words, let them know gently that LinkedIn is where your like to do business.

2. Create a Facebook personal profile AND brand page

Mike Frey is a fan of separation, so he maintains a private account and a company page. This way it's clear that the latter is for professional networking only. To create a public page simply go to thePagessection on Facebook. You have the option to create a page as a Business, Company, Public Figure, Brand, or Community Cause. One thing to note, until you have 25 fans you cannot get a custom URL for your page (an important part of your overall branding).

3. Push your business contacts to Twitter

Maury Estabrooks (@maurye) thinks using Twitter as a professional networking tool and Facebook for personal relationships is ideal. Since Twitter works best as a public forum, this is a solid approach. The only downside to this option is that your tweeting profile lacks the infrastructure to expand on your business information and history, so it's limited as a professional tool.

4. Tweak Facebook privacy settings

Ross Simmonds (@TheCoolestCat) believes that toying with your settings on the world's number one social network will help you to maintain separation. With these new-ish Facebook options you are able to decide which group of friends sees what. To do this go into your Privacy Settings and adjust the options within"Sharing on Facebook."This way you can adjust who can see what.

5. Take your private life offline altogether

As Chris McLachlin wrote me on Facebook, we have given up a lot of our privacy already. He mentions that everything we share is in the"public domain,"so people might as well get used to it or limit what they say. Out of the above tips, I most closely agree with this statement. While I have a personal Facebook account, I never share any photos there that I wouldn't be comfortable showing publicly. I also refuse to broadcast my phone number or address with anyone, and I more or less just assume that privacy settings won't help me that much if someone in my network decides to breach my trust.

Read moreWork Smart:

4 Painless Ways To Avoid Being A Digital Pack Rat

The 5 Best Free Tools For Making Slick Infographics

{Image: Flickr userKevin N. Murphy; homepage image: Flickr userMel B.}

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iFive: Cloud iTunes Imminent, Microsoft Argues With Intel, U.K. To Revamp IP Law, Google Against Face IDs,"Like" On 33% Of Web

1.Apple's cloud music service (possibly to be called iCloud) is looking more like a done deal--"multiple"sourcesare sayingApple's just signed a deal with EMI and is close to signing Sony and Universal too. Considering we've heard a while back that Warner is already on board, this means that unlike Google's or Amazon's attempts, Apple's cloud iTunes will, when it arrives, have very broad industry backing...which could let it sew up the market.

2. Microsoft has made anofficial attemptto rebuff Intel's claims that Windows 8 will be fragmented and lack backwards compatibility: Intel's words were"factually inaccurate"and"misleading."We don't know which bits in particular, nor what MS's plans actually are...so this story now has an even more unusual angle--Intel and Microsoft have been close allies for decades. Are they now falling out?

3. The U.K. authorities seem set to supporta revampof the nation's 300-year-old copyright laws, in a move that may set a global precedent. An independent review has this week concluded that IP protection laws were founded in a century when most of today's innovations weren't even conceivable--and the U.K.'s creative industries,"high technology businesses,"and smaller enterprises needed new laws so their progress wasn't"impeded."

4. Google's Eric Schmidt haswarned againstfacial recognition technology being used in certain ways online--such as automatically scanning faces in imagery to aid its search systems. The tech has extreme privacy-violating risks, and it's"surprising accuracy"makes it more worrying--to the point it becomes"creepy"and it's unlikely, Schmidt says, that Google will be doing it soon."Some company"will though, he warned, intimating Facebook.

5. In a study commissioned by theWall Street Journal, the social media"Like"and share phenomenon has spread very far across the Web: One third of the top 1,000 most visited websites have Facebook's"Like"button in place, 25% have an option from Google, and 20% bear Twitter's code. Meanwhile TV shows have received1.65 billion Likeson Facebook--suggesting that Facebook may be more important to the TV industry than we had thought.

Chat about this news withKit Eaton on TwitterandFast Companytoo.

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Amazon's Android March: PopCap Games Signs An Exclusive Deal

For any of the 50 million app downloaders who've racked their brains or thwapped their thumbs on an iPad or iPhone touch screen full of digital jewels, PopCap Games--or at least its runaway hit,Bejeweled--willring a bell. The company recently expanded its operations intosocial gamingwith the acquisition of ZipZapGames. Now it'ssigned a dealwith Amazon to make its first two Android-compatible games in the U.S. market exclusively available through the Amazon Appstore--not the official Google app market or any other Android app clearing house.

Chuzzlewill arrive in the appstore for a two-week period exclusivity starting May 17th, andPlants vs. Zombieswill be joining it later this month. In an extra boost for PopCap, and one that'll swing a bright spotlight onto Amazon's Android code house, the games will be free for the first day of their availability--then $2.99 after that. In its press release, PopCap mentions its senior director of global product Giordano Contestabile's remarks on using Amazon:"We'll significantly extend the reach of our top franchises to legions of new mobile customers,"and Amazon's category leader Aaron Rubenson is noted as saying"PopCap is a brand synonymous with great mobile apps."

But there's a far more interesting story here: Amazon is really trying to make its Android app store the one major go-to location for apps on Google's smartphone platform, with its curated approach that's highly reminiscent of Apple's stance on its own path-breaking App Store. In fact, Apple defends against alternative marketplaces popping up for its iOS devices, whereas Google does not--which has opened up the space for Amazon, which neither designs Android code nor sells an Android phone or tablet.

And there you get to the crux of it all. By signing up companies like PopCap with such clever deals, Amazon is building up the powers of its Android appstore and, sure, earning some income. But it could be really all about building a footprint for its rumored up-comingtablet.

{Image: Flickr userianlamont}

Chat about this news withKit Eaton on TwitterandFast Companytoo.

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Mike Tyson, App Maker:"I Don't Want To Be A Dinosaur"

"I never hung around geeks much,"Mike Tyson tellsFast Company. But when Tyson met John and Sam Shahidi, founders ofRockLive, and they flew him out to South By Southwest in Austin, Texas, to meet a herd of techies, many of whom grew up playingMike Tyson's Punch-Out!!, the champ was smitten."Afterward, when I dropped him off at the airport, he was literally teary eyed,"John Shahidi says. The heavyweight champion of the world had just been surrounded by enthusiastic gamers, programmers, and nerds."He looked at me and said, 'John, I've never done anything like this in my life.'"

In the Shahidi brothers, Tyson says, he found the perfect partners. They'd started with a silly app calledRunPee, which told you what moments in movies were safe for you to miss when you had to go to the bathroom. Itcaught Chad Ochocinco's eye, and the brotherssoon became expertsin getting big-name sports stars to collaborate with them on apps and games--without major sponsorship deals.

Mike Tyson: Main Eventis their biggest hit to date. Without any marketing, the game became a Twitter sensation, garnering tweets from Ashton Kutcher, Charlie Sheen, and dozens of other celebrities. It shot to the No. 2 slot in the Apple App Store within 72 hours; it reached the top slot in the U.K.; and it has been downloaded in over 90 countries. When I first spoke to the Shahidis a month ago, the game was just two weeks old, but players were already playing a collective 10 million minutes per week.

Fast Companycaught up with Tyson to talk about his new love for geeks, why this app is so meaningful to him and, how his game could soon let you take your aggressions out on Charlie Sheen, Tea Partiers, and even President Obama.

Mike, why did you decide to get aboard with this app?

I met John, and he's just a great guy, and I met his brother, and we decided to go forward with this, full speed ahead. They're just amazing guys.

How'd you like going to South by Southwest?

I never hung around geeks very much. That was amazing. I just think those guys were uninhibited, they were in their own world. It's just beautiful stuff, something you never experience before. You have this opinion about geeks. My brother comes from the geeky world, he played hockey with the other guys."What you doing playing hockey in Bed Stuy, Brooklyn?"Your mind didn't go that far back then. You thought hockey was just isolated to one race of people.

How have your fans liked the game?

Yeah, some of them thought it was a little complicated. I guess we had to make it a little simpler. I think it's awesome. It's got updates.

John tells me you take an active role in shaping the game. How did being boxing champion prepare you to be a game designer?

Common sense. And what you think people may like. It's all about catering to the people, believe it or not. That's what life's about, being in service to the people, people who are less fortunate.

What's the part of the design you're most involved with? Coming up with the bad guys?

Absolutely, 100%. Especially characters like Charlie Sheen. I see that, it makes me want to smash Charlie's face. As a matter of fact we should get some of the people from the Tea Party in there. Might want to put President Obama in there, get those guys in there too, for if you have a pugnacious attitude towards somebody in the Obama Administration.

Are you a gamer?

I play PlayStation. My game, I just started playing, really, believe it or not. I'm a late starter, I started playing games in 2008.

What took you so long? Why didn't you play games in the past?

Most of time I was training for a fight or had to go to court for something, so I didn't have time to play these games.

Fair enough. You joined Twitter over the summer, and your game has really taken off through Twitter. What do you think of Twitter?

Hey, Twitter's pretty outrageous. Like I was saying earlier, it's just the future, and I want to be part of the future. I don't want to be a dinosaur all my life.

You feel like a dinosaur?

It appears that way. You're just stagnant sometimes, you become a dinosaur. It becomes difficult to broaden your horizons.

This game helps you not stagnate, you're saying?

100%, man, this is some good stuff. I'm just enjoying this time of my life, middle age. I'm enjoying it more than I anticipated enjoying it.

What do you think about the future of technology?

I think technology is going so far that we have to hold it back some. Technology can be used to spy on us 24 hours a day. Every home, every igloo, every private place can have a bug in it.

When I was a kid I really liked to playMike Tyson's Punch-Out!!at the arcade.

Yeah, but it's nothing like this game. It's like night and day!

Can we talk about money for a second? My understanding is that there is, actually, some revenue share on the back end, but it's tied solely to the performance of the game.

I don't know anything about it. If there is, I haven't heard of it yet. I'm sure whoever has my back knows about it.

Most games, celebrities get a big up-front sponsorship deal. Why didn't you insist on that with this game? You could be making a killing!

Hey man, it's not about making a killing. It's about serving the people. It's about serving the people.

I have a business venture that will serve the people. Would you sponsor it for me?

Long as you got my man John with you.

FollowFast Companyon Twitter.EmailDavid Zax, the author of this post, orfollow himon Twitter.

{Images: Flickr userssorawo, emerille; homepage image: Flickr user-Bert23- www.aerosolplanet.com}

Read More:How Mike Tyson and Chad Ochocinco Made the Ballsiest App on the Planet

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