Keith Rabois: Square Will Be Way More Valuable Than PayPal

While Square kicked off a busy week in mobile payments with its new Square Register and Card Case products, the latter part of the week was dominated by Google’s new NFC Wallet and PayPal’s trade-secret lawsuit against Google, which appears to be a prelude to a big mobile-payments announcement soon.
But even with all this activity from heavyweights such as Google (s GOOG) and PayPal (s EBAY), Square apparently isn’t sweating over the added competition. The company announced this week that it has shipped 500,000 card readers and is nearing $1 billion in payments processed since launching eight months ago. I talked with uber-angel investor and Square COO Keith Rabois about the increasingly busy mobile-payments space, how Square will fare over time and the challenges facing both Google and PayPal.
Google Wallet vs Square
Rabois said he doesn’t see Google’s new Wallet platform as much competition because it is meant to work with large retailers, but has little value for the smaller local businesses that Square targets. Google Wallet is designed more to push advertising than solve major pain points for merchants, he said, which is a critical piece of the puzzle for mobile payments, something we’ve mentioned before. 
“Google Wallet is about improving ad performance, not about improving lives,” Rabois said. “We’re about improving the value proposition for both buyers and sellers and connecting the two. Google’s approach has merit, but it’s a totally different approach.”
That said, however, Google’s Wallet will compete with Square’s Card Case in delivering local deals and offers and Google will likely extend payments further down the chain eventually — so Square will go head-to-head with the web giant at some point. The startup, which has taken $37.5 million in funding to date, is also about to face more competition from PayPal, which has been readying a mobile payment and point-of-sale offering for merchants.
PayPal Brand Struggling?
But Rabois, who was an early employee at PayPal, dismisses the threat from his old company — saying its payment assets and fraud models are more relevant in online sales, not real world transactions. And he said he doesn’t hear too many people talking about PayPal for payments like he once did. “The brand has atrophied in the last decade and there are not a lot of users who wish they could use a PayPal account,” he said. “That may have been true a decade ago but not today.”

Rabois says he is confident in Square’s prospects because unlike PayPal — which went after the much smaller e-commerce market — Square is tackling the bigger market for real-world transactions. That’s why he didn’t blink when he said that Square will be worth more than eBay’s $1.5-billion sale price to eBay and will ultimately be more valuable than PayPal is today. “Because the market opportunity is so vast I actually believe there’s no chance we’re less valuable than PayPal,” Rabois said.
Now the Real Battle Begins
There’s no question that Rabois is stirring the pot with his comments. And PayPal and Google are also equally confident as well: PayPal spokesman Anuj Nayar said in an interview earlier this week that PayPal has proven itself as a payment leader while Square still needs to convince people to use it. “Existing models don’t go away until they are replaced by models that work better,” Nayar said. “I think people are getting held up in the technical possibilities, and are forgetting that at the end of the day, the consumers have to choose to use it.”
Nayar is right that Square still has a lot to prove. But it’s showing some impressive success for such a young start-up. Having seasoned entrepreneurs like Rabois and CEO and founder Jack Dorsey certainly helps too. Now, the company just needs to live up to the confident talk as its very well-financed rivals ramp up. This is where we find out if Square’s got what it takes.