Contactless payments at a store
Photo: Blake Wisz/Unsplash

Beyond the dongle: Apple won’t take down Square that easily

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Friday: Apple vs. Square, Robinhood’s tough compare and Visa and Mastercard’s money machines.

On the daily

If you’re reading this, I’ve got a hunch you like money. And numbers. What about … numbers and money? Every Friday, you’ll get our weekly chart, a visualization of what’s going on in the world of finance and technology. This week, it’s about Robinhood, whose short life so far as a public company has not exactly been up and to the right.
— Owen Thomas (email | twitter)

Apple vs. Square

First Apple replaced the credit card. Now it wants to replace the credit card reader.

That sounds like bad news for Block’s Square unit, which grew famous for offering a dongle that plugged into iPhones and took inspiration from Apple’s design sense. Block shares dropped nearly 5% Thursday after Bloomberg reported that Apple was preparing a product that would let merchants accept contactless payments via iPhones, no extra hardware needed.

Apple’s move is interesting, but the reaction is overblown. It reflects a superficial understanding of what Apple could do with the tech and where Square’s business lies today.

  • The Apple service would use technology from its acquisition of Mobeewave in 2020. Right now, iPhones use NFC wireless technology to send payment information to readers; the new tech twist would let Apple phones serve as a reader, too.
  • This could take the place of the Square dongle that became a symbol of Jack Dorsey’s disruption to payments. Goodbye, clunky credit-card terminals; hello, little plastic plug-in.
  • But Square’s innovation wasn’t just in hardware; it was in the range of software and services that businesses need to accept payments, which involves a lot more than just reading a credit-card number.

For most merchants, Square is a cash register, not a card reader — and more. First Square introduced the Square Stand, which encased an iPad. Then it upgraded to the Square Register, its own all-in-one device.

  • In terms of what a merchant needs to run a business, Block’s Square unit also provides software to run a virtual register — storing everything from menu items to prices to inventory, accounting for sales tax and tips, and generating a receipt.
  • It also offers services such as payroll, invoices, loans and even banking.
  • For Block, micro-merchants only make up a third of its gross payment volume, said Harshita Rawat, senior research analyst at Bernstein.

Apple’s new service could actually benefit Square and its payments rivals. Dongles were never the point.

  • Adding NFC reader capabilities to iPhones could help Square and other payments companies, like PayPal, in that it could enable smaller merchants to more easily accept payments without needing a separate piece of hardware.
  • Hardware is typically a loss leader used to sell more profitable payments services, anyway.
  • The Apple system wouldn’t accommodate chip or magnetic-stripe cards. Contactless payments are only about 20 to 30% of face-to-face transactions in the U.S. So not too many merchants would get rid of other hardware and go with this Apple contactless service alone, said Rawat.
  • But it could facilitate payments by roving employees, for example, to shorten lines while directing customers paying by cash or physical card to a register. (Apple uses such an arrangement in its retail stores.)

Apple wants to sell iPhones. That’s the driving force behind most of Apple’s moves into financial services, from its Apple Card, which it’s expanding with a planned “buy now, pay later” feature, and Apple Pay, which did an estimated $90 billion in stores in 2021. Selling to businesses hasn’t been a strong point for Apple. So Dorsey can breathe easy — and get back to making the world safe for bitcoin.

(This item was adapted from a story that first ran on

— Tomio Geron (email | twitter)


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On the money

On Protocol: Crypto’s biggest lobbying groups are sounding the alarm on provisions in the America Competes Act. Provisions of the bill, introduced to strengthen the U.S. supply chain and compete with China, could have a negative impact on the crypto industry, they worry.

Esusu has achieved unicorn status. The rent-reporting and data solutions company, which Protocol profiled in November, raised $130 million in its series B funding round, led by the SoftBank Vision Fund. Other investors include Motley Fool Ventures and Serena Ventures, founded by athlete Serena Williams.

Google Cloud now has a digital assets team. The team will support customers in deploying new products on blockchains.

Also on Protocol: Robinhood reported disappointing fourth-quarter earnings and offered an underwhelming revenue outlook, with shares plunging below $10 as a result. While its posted revenue topped expectations, its monthly active users fell by about one million. (See more in “Robinhood’s tough compare” below.)

Afterpay partnered with Nordstrom, Calvin Klein and Tommy Hilfiger. The top retailers have partnered with the “buy now, pay later” service to target millennials and Gen Zs, who have grown leery of credit cards.

The CFO of Wonderland stepped down. Online sleuths identified the DeFi project’s treasury manager as Michael Patryn, the co-founder of QuadrigaCX, a crypto exchange the Ontario Securities Commission labeled as a “Ponzi scheme” in 2020.

Mastercard and Visa both reported strong earnings. Both card networks beat profit estimates and their shares were up. Mastercard said it was working on accepting cryptocurrencies and growing in the “buy now, pay later” sector. Visa’s quarterly revenue exceeded $7 billion for the first time, and it said it was working on APIs for crypto and CBDC payments.

Robinhood’s tough compare

Robinhood reported its fourth-quarter results the day before the first anniversary of the GameStop trading frenzy.

That’s unfortunate on two counts. It reminded folks of the fiasco that turned into a PR nightmare for the company. And it led to what they call on Wall Street a tough compare — a really tough one.

Robinhood’s outlook missed expectations by more than $100 million, which sent its share plunging late Thursday. The company itself suggested that it really wouldn’t be fair to compare what they see this quarter to what happened last year when it saw “outsized revenue” due to the meme-stock frenzy.

Vlad Tenev said Robinhood’s stock performance over the last few months has been disheartening. “Let's not sugarcoat it,” the Robinhood CEO told analysts on Thursday’s earnings call. “We've been disappointed.” But the company, he stressed, is “focused on the long term.”

“Robinhood is putting as positive a spin as possible on this,” Klaros co-founder and partner Michele Alt told Protocol. But the company’s struggling with “significant and public customer service and reputational issues” that “may be hampering its progress.”

It won a victory this week when a host of customer lawsuits over trading issues were dismissed by a Florida court, but the accusations stung. Wasn’t Robinhood supposed to be the good guys? The ultimate tough compare may be against the ambitions Robinhood’s founders had for their creation.

– Ben Pimentel (email | Twitter)

The chart

Robinhood was one of 2021’s most-anticipated IPOs, with its trading revenues and user numbers juiced by meme stocks and crypto. Then regulators started asking about payment for order flow and the company’s money-making system of kickbacks from market makers; the crypto craze faded along with the price of bitcoin. After briefly peaking at $85 in August, Robinhood’s stock fell below the company’s $38 IPO price in October. Shares slid to $11.61 Thursday, and fell below $10 in after-hours trading as it reported it had lost users in the fourth quarter.

Lehane on the brain

Some readers were tickled by my reporting technique of guessing what outgoing Airbnb policy chief Chris Lehane’s new email address might be and seeing if a message to it would go through. Well, I may have been too clever for my own good — after my email server tried with all its might for a day to deliver the message, I finally got a bounceback Thursday morning, after the previous edition landed in your inboxes. I’ll keep trying to pin down which global crypto fund based in Silicon Valley has landed Lehane. The speculation continues: Besides Katie Haun’s fund (currently going by KRH Partners) and a16z, Paradigm is a plausible contender. Thoughts? Rumors? Scuttlebutt? Hit me up at owen at protocol dot com.

— Owen Thomas


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Thanks for reading — see you Monday!

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