Less than a month after raising $100 million in a deal that valued it at ten times that amount, Square is reportedly considering a new round of financing that could value it at up to $4 billion. $4 billion is also the amount that the company is processing in annual payments, according to CEO Jack Dorsey. Dorsey, one of the founders of Twitter, announced Square’s annual processing volume in a twitter post last month.
Square’s credit card swiping dongle is used by everyone from taxi drivers to babysitters to lawyers — anyone who finds it convenient to process credit cards with a mobile device. Square charges 2.75% for every swipe, and 3.5% (plus 15 cents) for every transaction that is keyed into a mobile device. So Square books just a fraction of that $4 billion as revenue, and then sends a big chunk of that to the credit card companies. Feefighters estimates that Square loses money on transactions of less than $6.00.
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PayPal recently announced a triangular dongle that will compete directly with Square. PayPal is charging less per transaction than Square, and will credit funds directly to users’ PayPal acconunts. In launching the product, PayPal touted its built-in encryption, and less than 3 weeks later Square announced that it is adding encryption to its dongle.