Square

In 2009, a glass blower in San Francisco lost a sale because she could not accept credit cards. The terminal cost hundreds of dollars and banks would not approve her. Jack Dorsey and the same glass blower, Jim McKelvey, built a white plastic reader that plugged into an iPhone headphone jack. He mailed it for free. The reader cost Square $8 to manufacture. The company gave it away. The business model was inside the swipe. Square charged 2.6% plus 10 cents per transaction. A $10 coffee generated 36 cents. A food truck processing $1,000 a day paid $26 in daily fees. The reader was the door. The processing fee was the rent. Merchants adopted Square because it asked for nothing upfront and took a sliver of everything afterward. Then Dorsey watched transaction data pile up. He could see which merchants sold more on weekends, which ones had growing revenue, which ones were reliable. Square began offering loans based on that data.