The recent events surrounding Square have illustrated a key question in business relationships in any market: is it better to work with others, or against others? Verifone didn’t endear itself to the geek community or even other business partners when it decided to launch a smear campaign about Square’s product on March 9th, 2011. Its assertions that Square facilitates card skimming, a technique to copy a person’s credit card number for nefarious purposes, are completely bunk! The reason: a scammer must physically possess the person’s card. You, the consumer, are at the same level of risk whether the scammer has a Square device, or a pencil and paper pad!
In contrast, Visa and Square jointly took the high road and continued to build their positive brand image while pushing innovation in the payments space. While Square seems to have capitulated to Verifone’s claims, it is far more likely that implementing encryption was a part of Visa’s terms to publicly back Square. The monetary contribution certainly seems to be far less significant than the potential reduction of Square’s barrier to entry to the payments market. After these events, Verifone may have been better off just ignoring Square!
Conclusion: Innovate with newcomers in your space, and you’re bound to get some halo effect and drive benefits to both companies!