Jack Dorsey created Twitter, now he's taking on the banks with Square

Conversations with Jack Dorsey often veer into the obscure. Job interviews pivot into 30-minute disquisitions on the New York Yankees. Press briefings transform into critiques of Virginia Woolf novels. A comment about Dorsey's game-changing startup, Square – which lets anyone accept credit cards – triggers a lecture on the history of money. And Dorsey can be downright verbose when talking about one of his seemingly limitless obsessions – maps, journal-keeping, perambulation, CB radio.

This tendency can become a problem for the 35-year-old, whose packed schedule would seem to afford little time for such digressions. In addition to his full-time job as CEO and unofficial chief design officer of Square – one of Silicon Valley's hottest startups, which recently sought a valuation of $4 billion (£2.6 billion) – he also serves as executive chair of Twitter, which launched in 2006 by springboarding off his idea that brief sneezes of communication could deepen human interaction. As the driving force behind the two startup darlings – and as a man often mentioned as the spiritual successor to Steve Jobs – Dorsey is in major demand.

Today, he has blocked off a slot on his calendar to talk about Square and how the company hopes to infuse financial transactions with a dose of human intimacy. We are sitting in the Taste tea shop in the Hayes Valley neighbourhood of San Francisco.

It is midday and we are the only customers. Dorsey has selected this teahouse because its customers pay with Square; instead of a register there is an iPad with a white plastic cube that accepts credit-card swipes.

But our discussion is sidetracked when the proprietor, Vincent Fung, starts a long and complicated explanation of the various tea options. A few minutes later, Fung appears at the booth with a deep wooden tray and begins a carefully choreographed ceremony. Dorsey watches the ritual and appreciatively touches his finger to a worn corner of the tray. "That's wabi-sabi," he says.

Dorsey has lots to say about wabi-sabi, a Japanese concept that beauty can be found in imperfection and impermanence. It's a complicated idea, involving not just art but philosophy as well. Dorsey claims that this mysterious aesthetic is at the core of his design philosophy, a simple yet lived-in quality that pleases and engages users on a profound level.

Dorsey's PR man – who has been sitting uncomfortably while tea was offered, madeleines served and not a word uttered about payment technology – finally speaks. "I love that you guys have been talking about tea for 40 minutes," he says unconvincingly.

But Dorsey is just getting started. In the spirit of wabi-sabi, I tell him that Jobs once compared the way the iPod ages to the weathering of blue jeans. This sends Dorsey off on another tangent, as it becomes instantly clear that he is not only an ardent admirer of Jobs but also a student of the denim arts. At one point in his career, just before starting Twitter, he took a course in apparel design, thinking he might become a jeans artisan. He leaps at the chance to educate someone.

Blue jeans, he claims, were originally made for miners and sea divers. Divers would break them in by sitting in a bath until the shrunken fabric embraced their legs like tights. The unintended side-effect was to transform each manufactured garment into a unique item that carried the imprint of the wearer's shape.

Naturally, when choosing his own jeans, Dorsey prefers ones that reflect that heritage. He is an aficionado of those made by fashion designer Scott Morrison. Once, Dorsey says with quiet awe, Morrison provided rigid, unwashed jeans to dishwashers at a New York City restaurant. They wore them constantly in the filthy, steaming kitchens, which created a bewitching pattern (known as "whiskering") that was painstakingly replicated by Morrison's jeansmiths. It's an elaborate process, all in the pursuit of wabi-sabi.

The conversation is beginning to sound surreal. But Dorsey has been talking about Square all along.

Face-to-face commerce today, Dorsey claims, is socially impoverished. Human beings have been handling money for thousands of years, but it is still an awkward, time-consuming, uninspiring experience. What if it were beautiful?

Dorsey is trying to create magic in an industry where people have not previously sought wonder and delight. In short, he hopes to pull an Apple on the entire financial world.

Dorsey first showed WIRED his payment app in the summer of 2009, when we met to talk about Twitter. It was bound to be a difficult conversation. Though he was listed as the chair of Twitter's board, and although the social network was his idea in the first place, he had been effectively shut out of day-to-day operations.

Dorsey relinquished the CEO post just as the service was becoming a household word. Instead, co-founders Evan Williams and Biz Stone became the public faces of Twitter, and Dorsey watched from the sidelines.

Still, he shrugged off the humiliation, insisting he'd volunteered to step down: "I think I rationalise it by saying Twitter is certainly bigger than me, bigger than anyone in the company." But wasn't it tough? "It was tough," he said then. "I have honestly been working on this concept for like 15 years." (Later, in a less guarded moment, he would admit to writer David Kirkpatrick in an interview for Vanity Fair that the departure hit him like a punch in the stomach.)

After we finished our Twitter discussion, Dorsey asked me casually whether I wanted to see what his new company was all about. Its name – Squirrel – was not particularly descriptive. He took me to his apartment in a high-rise overlooking the bustling plaza of San Francisco's old US Mint. The half-renovated one-bedroom looked more like a construction-site-cum-makeshift-office than a home. Young engineers were tucked into dusty corners, working away at their computers. At the kitchen counter, Dorsey explained he was going to empower everyone to accept cashless payments.

He took a piece of plastic shaped roughly like a white acorn, jammed it into the earphone jack of his iPhone, and asked me for my credit card. When I produced it, he swiped it through a slot on the acorn. Then he had me sign the screen with my finger and enter my email. When I checked my own iPhone, I had a message noting that I'd paid Jack Dorsey $1.

A Google Maps image marked the location. Dorsey was beaming like a proud parent.

Squirrel came about in a strange way. When Dorsey was growing up in St Louis, Missouri, he became fascinated with computer programming. As a teenager, he had a summer internship with an entrepreneur and glassblower named Jim McKelvey. Even at 15, Dorsey was impressive enough to be given responsibilities far beyond that of the average intern. And McKelvey and Dorsey remained friends throughout the younger man's early working endeavours.

Then, shortly after Dorsey left Twitter, McKelvey remarked during a phone conversation that he had lost a recent sale – a $2,500 (£1,600) blown-glass bathroom tap – because his customer could pay only with a credit card. As McKelvey recounted this tale to Dorsey – both of them with iPhones pressed to their ears – they realised that a business was literally at hand. Those smartphones had more processing power than entire banks did decades earlier. Why couldn't they process credit-card payments?

That story has attained near-legendary status, like Pierre Omidyar's Pez dispensers or Steve Jobs's visit to Xerox PARC. But the details are in some dispute. As Dorsey tells it, the customer was in the store and wouldn't run out to get the cash to pay for the item. McKelvey, however, says that the customer was calling from Panama, and he couldn't accept American Express.

Not long after, in February 2009, Dorsey, McKelvey, McKelvey's wife, Anna, and a friend named Greg Kidd drove north of San Francisco to a restaurant called the Pelican Inn. They spent the evening debating whether they should start a company based on the idea that the world needed an easier way to make payments in person. Eventually they decided to do it.

On the way home, they stopped to buy some water. Dorsey and Anna, who stayed in the car, saw a squirrel run across the bonnet. It got Dorsey thinking. Squirrels dart around and collect acorns – it's like currency for them! And like the word twitter, squirrel can also be used as a verb – people "squirrel" away their treasures! Dorsey instantly envisioned acorn-shaped hardware.

Within ten days, Dorsey and his team had whipped up a prototype, designed to be powered by the energy generated during the actual swipe. As a bonus, the sound it made when the card zipped through the slot resembled the squeak of a squirrel.

But the most outrageous part was how easy it suddenly became for anyone to accept credit cards. The process through which businesses are authorised to accept credit-card payments is arduous and slow. In fact, it took Square longer to get approval from Visa and Mastercard to accept a swipe than it did to create a prototype for the entire payment system. "Our sign-up process takes two minutes," Dorsey says. "You download an app, put in your name and address, answer three security questions, link your bank account and you're done." Just as Twitter democratised broadcasting, Dorsey's new company would democratise the credit-card industry.

Small problem: there was already a payment system named Squirrel. The team repaired to the dictionary and found a new name. A square is a fundamental shape that suggests heft. A square deal is a fair one. And when two parties settle a deal, they square up.

Square was positioned to disrupt the payments industry, but it wasn't out to topple the credit-card companies. Indeed, it could be a boon to them; payments that were once made with cash could now be made with credit cards. (Square, currently only available in the US, charges 2.75 per cent per swipe and gives the vast majority of that fee to the card issuers.) So Dorsey met with some of the biggest names in finance, such as JPMorgan Chase CEO Jamie Dimon and Visa head Joe Saunders.

The demo won over the bankers, and Visa became an investor.

Since then, Square has signed up more than a million merchants; it expects to process more than $5 billion (£3.2 billion) in US transactions over the next 12 months. Square has announced that it intends to be in several other countries by the end of the year. (It won't say which ones, and won't comment at all whether the UK is one of those nations.)

The difficulties of going abroad aren't so much regulatory but those involving partnerships: Square has to have a banking entity that channels its transactions (in the US it's Chase) and also has to cement relationships with the major credit-card firms in each jurisdiction it wants to enter. But high-level discussions are underway.

Outside another artisanal beverage shop – this time Café Grumpy in New York City's Lower East Side – a few days after our tea ceremony, Dorsey is sadly acknowledging he never met Steve Jobs. "We were setting up a time to meet – that was my last email to him – but then 'he got really sick'," Dorsey says. "I learned a lot from him from afar."

When people talk about who might fill the vacuum left by Jobs's death, Dorsey's name keeps coming up. Talented geeks once dreamed of working with Jobs; now they want to work with Dorsey.

Keith Rabois, an early PayPal executive and a hot prospect, says he took the COO job at Square in large part because of Dorsey. "There are three things you need to do as a CEO-founder," Rabois says. "Drive design, drive technology and think strategically. Some people who are really good at one can build a pretty foundational company. Most people who are very successful are good at two. But Jack is the only person in the Valley I've met who's all three."

Like Jobs, Dorsey has proclivities that have helped him build something of a cult of personality. Every Friday he indoctrinates new employees with a forced march through the streets of San Francisco, beginning at the statue of Mahatma Gandhi at the Ferry Building, heading into the canyons of the Financial District, and emerging in the startup haven south of Market Street where Square resides. During the walk, Dorsey outlines what he calls the Four Corners of Square. "It's something that codifies our ethic," he says. But he is mum on the details of this vaguely Masonic concept. "If I told you, you'd have to work here," he says with a tight smile.

Dorsey also boasts a Jobs-like obsession with design and detail. In early 2011 he became captivated by the idea of using a wallet metaphor in a Square app. William Henderson, a former Apple operating-system specialist who now works at Square, says, "Jack came to work one day with a stack of ten leather wallets." For hours, Dorsey and his team deconstructed every detail. He was especially fond of the Hermès. The team designed a digital wallet that faithfully replicated it.

It even carried a monogram, extracting initials from the user's registration information and dropping the trailing dot after the second initial, just as Hermès does. The credit cards, which fit into their slots at slightly asymmetrical angles, were stamped with holograms that changed colour when the screen was tilted.

But, perhaps Dorsey's most Jobsian trait is his knack for disrupting entire industries and forcing them to follow his lead. The established companies that process merchant transactions – such as PayPal and VeriFone – were caught off guard. Now they've launched competing offerings. PayPal has created PayPal Here, with a stylish triangle-shaped card reader the company says is more structurally sound than Square's. PayPal president David Marcus thinks all of PayPal's 110 million users will eventually adopt it. VeriFone, the leader in credit-card-swiping machines, built a Square knockoff called Sail, which has a flap that extends down the back of the smartphone. (Intuit has offered its own mobile credit-card system, called GoPayment, since 2009.)

The message from those giants seems to be, thanks, kid, we'll take it from here. "There's no question they've innovated," Pay-Pal's Marcus says. "It's been good for the ecosystem. And Jack is a good guy. But people need a multichannel solution." Jennifer Miles, an executive vice president at VeriFone, adopts a similar tack: "Square took a sleepy industry that was doing things the same way for years and innovated. But that process is replicable."

Dorsey is unimpressed. First of all, he thinks it's wrongheaded to build those flaps on readers that plug into smartphones: "We don't want to add things – we take things away to make them more simple," he says, once again sounding like Jobs. More broadly, Dorsey takes issue with the implication that Square is too naïve to compete with the ultra-sophisticated finance industry. "Yes, we're naïve," Dorsey says. "But that's a strength, not a weakness. We have fewer than five people in a company of 250 who have worked in the financial industry. So our approach is to engineer and create and build what we want to see." In any case, should Dorsey get stumped on some intricate issue of high finance, he can seek enlightenment from Larry Summers, a former US Treasury secretary under Bill Clinton, who sits on Square's board.

If VeriFone and PayPal spent as much time studying Jobs's legacy as Dorsey did, they'd understand the risk in mimicking another company's products. Indeed, in the same way that Apple introduced new versions of its devices just as competitors caught up to its previous model, Dorsey has already released the next iteration of Square – a swipe-free version. It began at an all-hands meeting in late 2010, when Dorsey issued a challenge to his staff: "I want to have a payment experience that's so smooth that when I walk out I won't be able to remember if I even paid."

Imagine if customers were checked in automatically via Wi-Fi any time they walked into a participating store. When they wanted to buy something, they could just give the merchant their name. They'd never even need to reach into their pocket!

The vision – swipeless pay, if you will – was a logical extension of Square's mission of turning payment into an intimate experience. But instead of merchants doing all the work, this required customers to download an app too. They dubbed it Card Case. The first version – which featured the passionately designed digital wallet, including virtual credit cards for each participating merchant – launched in the spring of 2011. A few months later, while being interviewed by Dorsey for a job at Square, an Apple iPhone product manager named Shuvo Chatterjee pointed out that, while he loved the service, the wallet metaphor didn't really work. "I'm collecting those cards, but it's not really scaling," he said. "In my real wallet, I don't have one card for every merchant I buy from." Dorsey hired Chatterjee and made him the Card Case product lead. In March 2012, they released an update. The beloved Hermès wallet was gone, replaced by a cleaner interface that more effectively promotes discovery of new places. (Once you establish a relationship with a merchant, it's like opening a bottomless ledger, one that can easily handle things like loyalty programmes.) The app also acquired a new name, Pay With Square, an indication that it was no longer a side project but had become crucial to the company's mission. No dongle required.

Dorsey says that he learned a lot during the early days of Twitter – including what not to do. "I wrote down everything that happened at Twitter, and we corrected all the mistakes," he says. Twitter's rise was hampered by managerial whiplash and frequent outages. So with Square, Dorsey says, "We immediately focused on the culture – reliability and uptime. We focused on having a design team. Pretty much everything was a reaction to those early years."

In March 2011, Twitter CEO Dick Costolo hired Dorsey back, both for his design savvy and, as he puts it, a "sincere appreciation for the vision of the founder". Today Dorsey splits his time between the two companies. "It's unusual, but the companies have a lot of parallels," he says. "They're both utilities. They both can be used by a dynamic range – from individuals to the largest organisations in the world. They both have social aspects; payments are just another form of communication. Both are exchanges of value."

However, some have criticised Dorsey's dual role, arguing that he is spreading himself too thinly. "I will do whatever it takes to make sure both succeed," Dorsey insists. "It's like two family members you care for and love deeply."

Earlier this year, Square leveraged the popularity of the iPad into an opportunity to expand its business beyond individuals to boutique-level merchants. It releasedSquare Register, an app that makes it easy to use an iPad as a full-featured cash register. Vendors can set up buttons for each item they sell, much as McDonald's lets cashiers simply press "Shake" instead of entering the price. It can also connect wirelessly to a cash drawer.

But Register's real value is it offers sophisticated analytics for free. Its users get data that allows them to identify which products are selling and when, and future versions will be even more powerful. "As a customer enters the vicinity of the establishment, a notification will spring open on the merchant's screen," says Megan Quinn, Square's director of products (who has since left the company). "It will show the customer's name and suggest their most likely order, based on an algorithm that knows past purchases and things that sell well at the store."

Henderson, the engineering lead on Pay With Square, points out that the company collects all kinds of information about its users, data that might be invaluable to merchants and customers alike. "First of all, we know your location," he says. "Second, we have a decent sense of your history. We know the kinds of places you've been and what you like.

But we also know lots of other things – like if there's a whole bunch of food trucks that pull up nearby, we'll see the spike in activity and can point you to those trucks. I think you'll see us getting really good at this."

Analytics and data-mining might provide Square's real business model. So far, the company has charged a very small fee for each transaction, and merchants aren't likely to pay much more. And although Square has been giving participating merchants access to analytics about their businesses for free, it is also aggregating that data, real-time information about what people are buying in every region of the US. It's reasonable to think that might be very valuable in the near future.

Square is currently focused on smaller merchants, but its executives believe that even tier-one retailers will use Square before long. "The Neiman Marcuses and the Walmarts will want an emotional attachment to their buyers, where anybody can walk in and pay with their name and have an electronic receipt," Rabois says. "That's what we're going to deliver."

In other words, Square aims to provide shoppers with an emotionally satisfying experience – and it is using the Apple playbook as its guide. "My challenge to our product team is to build the app they themselves want," Henderson says. "That's something I learned at Apple. That's the reason it's able to consistently surprise consumers." Working the Apple way isn't too hard for Henderson, because "almost every one of my team from Apple is now at Square".

And just as Jobs did, Dorsey works hand in hand with his designers. "It's almost as if the whole of Square is a manifestation of Jack's mind," says Twitter's Stone, who has remained close to Dorsey and is an investor and an adviser to Square. "He was always that way, but now he has the gravitas and authority to make it happen."

Recently, Dorsey oversaw a rejigging of the icons for Square's iPhone apps. He took special care with the one for theCard Readerapp. The design he settled on was a version of the company logo, set atop a blue background. There's something evocative about it – it isn't an antiseptic patch of blue. It's a bit weathered, textured, striated. It is, in fact, a photograph of a swatch of denim from Scott Morrison's high-end jeans, shot directly from Jack Dorsey's leg.

Wabi-sabi heaven.

Steven Levy is senior writer at Wired US

This article was originally published by WIRED UK