Square producing 10,000 card readers a day

SANTA CLARA, Calif.--Twitter co-founder Jack Dorsey's latest project, Square, which plugs into mobile devices and allows users to process payments, is getting bigger.

During an interview with VentureBeat's founder Matt Marshall as part of this year's Demo Fall conference here, Dorsey explained that the company was now producing some 10,000 scanner units a day, which allow Square users with a smartphone and the Square software (which is free) to run credit card payments from just about anywhere.

Dorsey compared the speed of Square's rollout, which was put on hold in late-June while the company re-evaluated its risks, to that of Google's Gmail. "The reason we're pacing this out is because Square lets you get into credit cards right away. Normally it takes three to four weeks. We have to sponsor all these people right away, so we have all that risk and fraud right away."

Despite the risk, Dorsey said that those involved in the private beta have been playing by the rules. "We've only had five chargebacks, and they've all been dismissed," he said. The problem, Dorsey explained, would be with wider use, which the company has delayed in favor of spending time to make the system as secure as possible. As a result, the company has spent the last several months building tools to track activity and spot trends.

The tracking tools have highlighted data trends that Dorsey said helped create parts of the business he and the rest of the team had not originally imagined. For instance, Square's analytics tools monitor when, where, and what items users are buying--and for how much.

"We're getting this rich data about cappuccinos sold and how much they cost. That's fascinating to have that kind of data, and to build that into a tool for our users...no small business really has that sense of analytics," Dorsey said.

Along with Square, Dorsey reflected on some of the stumbles made in creating Twitter, where Dorsey continues to reside as chairman. "One of the things we did fairly poorly in the early days was that we were building this transparent company, but we weren't bringing users into that," he said. That resulted in the creation of the company blog, as well as a blog to let users know when the service was undergoing maintenance.

Dorsey also pointed at the difficulties in creating a service that would go from light to heavy use in an instant. "Imagine during halftime at a sports game everyone uses the plumbing system, and you get that big surge all at once," he said. "Twitter has a lot of similar issues with activity, and engineering for that is very difficult."

Dorsey said big traffic spikes continue to be a challenge, but that these days Twitter has the tools to find out what happens when things go wrong. "When the real mistakes were made, we had no instrumentation at all. We had no analytics, no data about about what was actually happening to the system. So we were pretty much flying blind," he said. "We didn't take the time to build the systems to watch what was happening with the network and how our users were interacting, and those traffic patterns. And once we did, we discovered holes, which we'd fix. And that's something we did immediately with Square."

Square faces a number of emerging and existing competitors, including Apple, which is rumored to be working on a payments system that makes use of its iTunes account system and potentially upcoming phone hardware. Casemaker Mophie and Intuit have also teamed up to create the Marketplace case, which competes directly with Square by letting users scan credit cards with their phone. For more on that, see: Is your phone the wallet of the future?