Square gets ready to move into local commerce, challenging Yelp and Foursquare

Square is looking to build a recommendation engine in addition to its payments system that could challenge the likes of Foursquare and Yelp as the company moves into the local recommendation space, The Verge reported Friday.

“I think we can do something a lot better” than those other apps, Ajit Varma, Square’s director of discovery, said in the interview.

Square card reader mobile paymentWhile Foursquare has recently confirmed its intentions to move away from check-ins and mayorships and toward local commerce, hoping to solve the problem of finding the best businesses near you — that you’ll actually like — hasn’t been completely solved. Not enough people are checking into places on Facebook yet to make the company’s service all that useful, and while Yelp is the established favorite, reading reviews there is a little like shopping on Amazon — you need to know what you’re looking for when you go in. Google’s search offerings and Google Now app have strong possibilities for local commerce, but haven’t yet captured the mobile market.

While Square is still a relatively young company, having launched in 2010, it’s already inked a deal with Starbucks and has millions of local merchants connected to its payments service, and as we wrote, the company had a particularly strong year in 2012. It makes sense that as the company expands further and more merchants allow customers to pay through Square, it will acquire a vast amount of data about your purchasing habits — data that both Foursquare and Yelp lack.

Square has your credit card on file, knows where you typically shop, how much you spend, and how much you tip, even, which could allow the company to make much smarter recommendations than its competitors. For instance, if I go to Starbucks every day to purchase a bagel, Square might know to recommend bagel shops to me instead of coffee shops. Or if I leave better tips at one restaurant over another, Square might be able to determine how much I really liked those two restaurants relative to each other.