Where are the biggest pain points that need solving in payments right now? Where are the biggest opportunities for tech to have an impact on the world? Which are the most exciting companies in payments? These are all questions we recently put to someone who knows a thing or two about launching disruptive paytech: Jim McKelvey, who co-founded one of the most high profile companies in payments today: Square.
The San Francisco-based company, which went public last year, made waves as a startup with a mobile plug-in card reader that enabled merchants to accept card payments with their mobile phones and launched a slew of copycat products around the world. Last year Square says it turned over $35.6 billion in gross payment volume (up 50% compared to 2014), but has long been diversifying its product set away from its core mobile payments service to include things like working capital and a marketplace for merchants as it moves to broaden and strengthen its business in the long term. The latest news is that the firm is prepping for a UK launch that would mark its first step into the European market.
But just like any startup that manages to grow into a scale-up business, luck, necessity and serendipity have had just as much to do with the company getting off the ground in the first place as the original idea.
Here, we chat to McKelvey, who co-founded Square with the firm’s current CEO Jack Dorsey back in 2009 and now sits on the board, about the early days of Square, what glassblowing has in common with paytech as a career choice and what companies he’s excited by in the space right now.
What is biggest pain point in payments?
The biggest problem in payments today is the accessibility to the masses of sophisticated tools both in investing, remittance, payments – anywhere you can bring the tools enjoyed by the elite to a mass audience there is a tremendous opportunity.
What did you learn building Square?
We learned a lot when we were building Square. One is that it is impossible to know everything in advance. You sometimes have to build products in advance of knowing whether they will work in the marketplace. We had a couple of hits and we had a couple of misses, but generally the biggest successes were products were the ones where in the beginnings it was unclear whether they would be successful or not. So being able to take the risks on those products and have the guts to try something new was probably the biggest lesson we learned.
How did you develop the idea for Square?
In all cases when we create a product it is to solve a problem. We don’t just do it because it is cool. We look at a problem and then focus a solution on that problem. The first problem with Square was that I as a small merchant needed to get paid and I could not take AmEx cards so I needed to create something to solve that. In the process of doing that we then exposed other problems.
The next problem was once I start to get paid, how do you keep track of that money? Once you are doing that can you use that data to expand sales. As sales expand you need working capital so is there a way to take all that information and provide that working capital?
In each case you start by identifying a real problem and then focus resources towards solving it.
What companies excite you?
The ones dealing with the bottom part of the pyramid. They are the people who have traditionally not participated in the system. Square has some new products addressing new areas that were historically outside the fin system. I’m also very excited about Money on Mobile [on whose board McKelvey sits] which is enabling payments in electronic format for hundreds of millions of people in India.
There is also a whole rash of fintech startups doing basically the same thing – bringing sophisticated tools down to people who have never before had access to them.
What are common threads in your career?
One of the toughest questions I have is explaining the career arc that I have had: from cars and glass blowing to payments to the non-profit helping people get jobs as programmers to Square of course. To me the common theme is that in each case I found a problem I wanted to help solve. For example Launchcode, the non-profit I run right now, is an effort to solve a problem that we do not have enough trained programmes in this country. That became a big enough problem that I decide do put some efforts into helping to solve it. Here we are three years later with a whole team focused on that problem and that team is better than I was at the beginning so I have moved on to other things.
That is the common denominator around what I do: I focus on a problem, assemble a team, someone on that team will be better than me – they end up running it and I move on.
The glass blowing fits the problem as well because when I started blowing glass it was not to become an artist it was because I needed an income. When I started my first company and it was not making money I fed myself by going into the studio, making work and then selling it. It was purely a means to an end. The fact it happened to be an art was coincidence.
Where are opportunities for tech outside finance?
Outside the world of finance, I think tech mostly has the power to include or exclude. We have seen a trend recently because where because we able to select our media it is excluding people. We used to have a situation where everyone got all their information form the same broadcast sources. In those cases people had at least the same data sets to work with, even if they disagree fundamentally.
Now with tech we can select news outlets that cater to our personal biases and that is separating people and that is one of the downfalls of technology. But tech also gives us the tools to solve those problems like twitter and Facebook and things that allow us to distribute, share and communicate information as well as expose information from sources we would never have had access to before, is kind of a counter balance to this, but it’s still an open fight.
Would you change anything about your career?
I don’t know because I have been incredibly lucky so I feel like if I had not done something I would not have gotten lucky later. For example I founded square with Jack Dorsey who worked for me at a company 20 years ago. Would I change that company? Yeah it might not have been as successful as it could have been. But then I may not have had to hire Jack and we might not have Square all these years later. Square has made some mistakes, would I change those? Well, overall, Square has done very well so I think the fact we made mistake was part of the journey. If I had to do it again I am not sure if I coud.
The thing about being lucky is you never know if it is luck. Sometimes it feels like hard work. I am a hard worker but I have also been lucky.
What’s the best advice you’ve been given?
I have never had a mentor per se. I look up to my father, but he was an academic. Of the people I have respected, they are philosophers, artists, mathematicians. But the best business advice I have had is: ‘That’s impossible’. I usually hear that when I am trying some new venture and seeking an expert who tells me ‘ you can’t do that’. When we started Square we were told by various finance experts we were told we could never have an underwriting model that would include all those people who were formerly excluded. When we started third degree, my glass blowing studio, I got the third degree from my banker who thought it was so insane to build a studio in a bad part of town in an old gas station.
I would not call it advice necessarily, but certainly it is inspirational for me for someone to say ‘that can’t be done’, because then I just want to go and do it.
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