Jack Dorsey founded payment start-up Square Inc. with a mission of rethinking the way people buy and sell stuff with their mobile phones.
Rising competition may get some merchants to rethink using Square.
Consider Fabrice Yopa, who used Square to collect payments for his online video business. Yopa ditched the service a month ago, saying he's fed up with how Square handled $4,000 in frozen subscriber payments.
"We've never had these kinds of problems with any other companies we use, including PayPal," Yopa said. "I would not recommend Square to anybody."
With Monday's debut of Apple Pay, a service that lets shoppers buy goods in stores using Apple Inc.'s iPhones, and the coming spinoff of eBay Inc.'s PayPal, more Square customers could be lured away by rival services that offer lower fees, easier transactions and a deeper pool of buyers and sellers.
The stiffening rivalry among Square, Apple, PayPal and other payment technology providers — all betting on a future when digital wallets replace cash and credit cards — reflects the rising stakes in a market that EMarketer Inc. estimates will be worth $118 billion by 2018, from $3.5 billion this year.
Square, co-founded by Twitter Inc. Chairman Dorsey, was one of the first companies to introduce technology that turns smartphones and tablets into credit-card readers. While Square appealed to smaller merchants seeking an easy way for customers to pay for goods and services, the start-up is seeking to expand into bigger retailers.
The key question is whether almost $600 million in funding over five years has given Square enough of an edge to fend off rivals, according to Scott Jacobson, managing director at Madrona Venture Group in Seattle.