Square Expands to Japan as Its Staff Shrinks by Two

Square announced expansion into Japan with updated Register features today, after seeing two executives, Alyssa Cutright and Alex Petrov, leave the mobile payments company.

Square's expansion into Japan comes from a partnership with Sumitomo Mitsui Card Corporation, the company responsible for bringing Visa to Japan.

"Japan is a nation of small business – more than 99% of all businesses in Japan are small or medium-sized, employ a majority of the working population and account for a large proportion of economic output," says Aaron Zamost, a spokesman for Square.

In Japan, "there's no denying that the market is pretty hot there," says Michael Versace, global director at IDC Financial Insights. "There's a lot of pent-up demand and growth we see in business there."

But because Square hasn't realized its value in the U.S. market, "the move to Japan is really off strategy in my opinion," says Gil Luria, an analyst at Los Angeles-based Wedbush Securities. "They're spending money on international expansion but this doesn't help them realize the value."

In October, Square expanded into Canada, its first market outside the U.S., fulfilling its promise to expand internationally after receiving a $25 million investment from Starbucks Corp. According to Square, its growth in the Northern provinces is exceeding expectations with gross payment volume over six months in Canada 90% higher per capita than the U.S. during the same introductory time frame.

Luria says the investments might be influencing Square's expansion.

Because the Japanese market demands elegance, Square might be a good fit, Versace says.

Square creates features that are elegant, simple and convenient, he says. "There's a large base of Japanese consumers … and they love convenience in payments."

Zamost says Japan's emphasis on design and craftsmanship echoes that of Square.

A free app, Square Register works as a point of sale system that operates from a mobile device such as a tablet. New features on Register 3.1 for iPhone allow custom tip amounts and the ability to add multiple custom amounts and notes to sales. For the iPad version of the app, Square has added support for Bluetooth-enabled bar code scanners.

The new updates are targeted at quick-service restaurants.

"Square is going on a path to make its bundle more and more valuable to get bigger merchants to adopt the solution," says Luria. The company wants to keep its fee structure in place so it'll continue to add features to make its system more attractive, he says.

While Square is enhancing its product set and expanding internationally, it's competing for top payments talent with other companies in its market.

It lost two prominent executives, the tech news site allthingsd reported yesterday. Petrov, who was hired as vice president of partnerships, had not begun his work at Square. Cutright, vice president of international, left Square in March after only one year.  Zamost confirmed their departures but declined to discuss specifics.

The latest departures are a sign that payments innovators that understand the market and are successful are in very high demand, says Versace. "The talent pool there isn't very deep," he says.

"Google Wallet, PayPal, Braintree and a number of startups are all chasing a small number of highly qualified payment executives," says Luria. "It's a gold rush to realize the benefit of new technology; payment executives seem to be on a game of musical chairs right now."

Braintree, for example, recently hired former Square engineer Rob von Behren, adding to a roster that also includes veterans of Google and Yahoo. In January, Square also lost its chief operating officer, Keith Rabois, who resigned amid allegations of sexual harassment.