Square - upwardly mobile - FT.com Howard Schultz, Starbucks" boss, has called mobile payments "the fastest growing opportunity we've ever seen in terms of customer acceptance." That explains why the coffee shop chain is investing in Square, the company led by Jack Dorsey (the co-founder of Twitter) that aims to become the default "wallet" service for mobile payments. The latest round of financing, to which Starbucks contributed, shows how high expectations for the business have become. The fundraising - $200m - values Square at $3.25bn. Various companies play roles in the payment processing chain. Square makes a plastic card reader that enables the start of the process to occur over smartphones and iPads as well as software for initiating payments with the wave of a phone. Charging a 2.75 per cent transaction fee, Square claims to be processing $8bn in payments on an annualised basis. To put that in context, Visa processed nearly $4tn of payments in the last year. If Square can drive its volumes to say, 1 per cent of Visa's level, or $40bn five years from now, it would make $1bn in annual revenue. Visa-like margins of 60 per cent would mean net profit of some $225m, suggesting that the latest investors paid a reasonable 14 times future earnings. But that is unlikely. The majority of the 2.75 per cent fee goes straight back to credit card companies. Unless the business has extraordinarily low operating and marketing costs, it is hard to see how Square makes much money, even when it is processing five times today's volumes. Clearly, Square needs to achieve enough scale to negotiate better terms with credit card companies. And, with companies including Google and PayPal mobilising with their own wallets, competition on share and fees will be fierce. Like all big opportunities, it will attract big opportunists.