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Square Finally Gives Up on Square Wallet and Bets on New Order-Ahead App

Square introduces a new consumer app. It might be its last chance.

Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

The grand Square Wallet experiment is over. As of today, Square has pulled the app from the Apple and Google app stores. At the same time, it is introducing Square Order, an app that lets shoppers place pick-up orders from, and pay at, coffee shops, cafes and other Square merchants right from their smartphone.

Square Wallet was Jack Dorsey’s startup’s big bet, launched three years ago, to allow coffee shop patrons and restaurant goers to use payment information stored in the app to pay for goods by checking in to a shop via the app and then simply giving a cashier their name at checkout. The theory was that cafe or restaurant patrons would find that method of payment easier than swiping a physical payment card.

But today, Square is essentially acknowledging what has been clear for some time, that Wallet failed to attract the customer interest Square hoped it would.

In its place, Square is once again trying to create a payment product that appeals to patrons of small businesses. This time, the pitch is that people who download the app can avoid waiting in line by ordering a beverage or food from their phone before arriving at one of the shops listed in the app. If there’s an option between having an order ready for pickup or walking in and waiting in line, who would possibly choose the latter? Square’s thinking goes.

“Square Wallet provided a very magical experience but didn’t have a lot of the utility value,” Square’s Ajit Varma said in a recent interview.

Square will continue to support the Wallet app for those who have already downloaded it, in part because Order was built with new backend technology. But Wallet won’t be available for new users to download.

“We want to make it really clear to people looking for Square in the App Store that Order is where we see the future,” Varma told Re/code in a follow-up call last week.

The decision to move away from Wallet is a big moment for Square, though not an unexpected one. The app hasn’t ranked in the Top 200 free Finance apps in Apple’s Appstore for some time and the company never got the help pushing it from Starbucks like they hoped, according to people familiar with the deal. Varma said it only took two meetings to come to the decision to remove Wallet from the app store.

Now, Square is betting that Order will find more success. And it better; it seems unlikely that Square will get many more chances at creating a hit consumer product.

But it will face competition: apps such as PayPal and Tapingo already let customers place orders for pickup from their mobile phones. Delivery apps such as GrubHub and Seamless (owned by the same company) also allow for pickup orders, though it seems the type of businesses Square is working with aren’t ones most likely to list with the delivery companies.

Why is the consumer side even important to Square? As I explained in a recent feature that explored the company’s acquisition and IPO hopes as well as challenges, if Square is ever going to live up to its $5 billion valuation, it needs to diversify its revenue streams so it doesn’t depend solely on regular payments fees and the unimpressive profit margins that come with them. One big reason why diversification is important is that small businesses don’t have a problem moving to the payments provider that pitches the lowest fees, unless that payments company also provides other value.

Square thinks the order-ahead feature will be one way to provide additional value for its merchants.

That said, the company raised some eyebrows a few weeks back when it said it would charge businesses eight percent for these order-ahead transactions, rather than the 2.75 percent flat rate for most credit card purchases that run through Square’s platform. The reasoning, it said, was that the feature would help bring in new customers.

But critics countered that it seemed more likely that the capability would be used initially by a shop’s existing customers, which would mean Square was taking a larger than normal cut of purchases made by customers who were going to buy something from a given store anyway.

Varma admits that the Order app may initially appeal most to a shop’s current customers. That said, early results from a beta test show that these customers begin ordering more frequently than they previously did.

Over time, though, Square’s goal is indeed to drive new customers into businesses that use Order. How? Square is going to run advertising on behalf of businesses listed in the Square Wallet Order app, include them in loyalty programs and fund discounts to get new shoppers in the door, Varma said.

In the long run, “it is all about new customers,” Varma said. “That is the focus.”

He would not provide more details about these future initiatives, but said they would help make Order a cheaper customer acquisition tool than those offered by food-delivery services such as GrubHub and deals companies such as Groupon.

That reality is, for now, a way in the future. The Order app currently lists only about a dozen and a half businesses in New York City and a few more than that in San Francisco. Varma said new merchants will be added to the service each day and the service will eventually move to other cities.

The app itself is designed well. Menu items are easy to find and each store lists the approximate wait for an order. Orders take just a few clicks to order after uploading your credit card information the first time. After doing so, the app sends a push notification to confirm when the food or beverage will be ready and another when it is available for pickup.

Over time, if a customer turns to the app repeatedly to place an order from the same shop, Square will start to make it easier to do that in just a few seconds.

“One of the things we’re most excited about … is making almost a personal assistant for you,” Varma said. “We’ll know what you want, not only that you like coffee but coffee with almond milk. And we’ll make that one click away for you to order.”

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