Visa Inc. is lending its clout — and some cash — to mobile payments company Square, bolstering prospects for the San Francisco start-up.
The credit card giant said Wednesday that it made a strategic investment in Square, which will also include one of its executives joining the company’s advisory board.
Square declined to comment on the terms. A person familiar with the deal said it was in the “single-digit millions.”
The investment was the latest in a move by Visa to evaluate “new technologies and invests in payment innovations that can enable more businesses to accept Visa,” said John Partridge, president of the Foster City, Calif., company.
In February, Visa bought PlaySpan, a platform for buying and selling virtual goods, for $190 million in cash. The purchase came one year after Visa paid $2 billion for CyberSource, which helps retailers accept online payments.
“Square’s early success suggests that using Square and a mobile device, new types of merchants will now be able to accept payment and help grow their business via Visa’s global network with the security, speed and reliability we provide,” Partridge said.
Square’s mobile device allows individuals and small businesses that could only take cash and checks to also accept credit cards. It recently closed a $27.5-million round of funding led by Sequoia Capital, giving the company a valuation of $240 million, up from $45 million in the previous round of funding.
Square is led by Twitter Inc. co-founder Jack Dorsey, who has said he wants to bring the simplicity of Twitter to mobile payments. It produces a free tiny credit card reader that plugs into the headphone jack of an iPhone, Android phone or electronic tablet, turning cellphones into credit card readers, even for merchants who run stands in farmer’s markets and flea markets. Square charges 2.75% per transaction to the merchant.
Square, which started its service in October, said it was signing up nearly 100,000 businesses a month. Chief Operating Officer Keith Rabois declined to say how many customers Square had, but noted that several hundred thousand merchants were using Square.
Square last week landed a deal to put its credit card reader in Apple Inc.'s 235 U.S. stores. Rabois said the moves would accelerate Square’s growth.