There's a revolution taking place in the retail world. Instead of increasing revenue through opening new shops – traditionally considered the next sensible step – businesses are using technology to understand their customers. Devices installed in stores allow owners to predict the best opening hours, how many staff are needed on any given day and even if a messy table arrangement piques more interest than a tidy layout.

But implementing such technology can be expensive for small businesses, especially if they don't need to know the exact number of people in a store at any given time but perhaps the item that is selling the best. It is arguably this area where mobile payments can be most useful.

Square, the brainchild of Twitter co-founder Jack Dorsey, launched in 2009 and its flagship service is an affordable card reader for companies in the US, Canada and Japan. Market stall owners and cafés who only accept cash can request a free Square card reader to an iPhone or iPad and accept card payments for a 2.75% fee, cheaper than many credit card companies.

Faryl Ury, Square's spokesperson, told the Guardian that Square had three main areas where they beat competitors:

1. Affordability. "Square basically revolutionises the payment industry by offering one rate," she said.

2. Customer experience. It's meant to be simple to use, she added.

3. Aesthetics. Some businesses spend a long time creating a beautiful design for their store only for clunky cash registers to ruin the façade, Ury explained. As an alternative, Square's card reader only needs a smartphone and their latest product, Stand, is a minimal point of sale register.

Businesses can connect the Square Register to a smartphone or tablet. Photograph: Square

One of Square's customers is Mary Walsh, who co-owns Swamp Rabbit Cafe and Grocery in South Carolina and she echoes this statement. Before opening the business two years ago, Walsh and her business partner researched their various payment options and opted for Square for its transparency and simplicity.

"Our main thing was that it was simple and that it was an honest company. I think a lot of Square's competitors' fees were so complicated that we didn't understand what we were paying. The start up costs were a lot cheaper – we just needed an iPad – and the simplicity was important too," she said.

That makes sense when considering that keeping costs low is a very important factor for any small business. But Ury's answer is surprising: where does big data come into the equation? After all, Sarah Friars, Square's CFO, told the Harvard Business Review in June that big data is one of the most "exciting" trends in the mobile space.

Friars told the Guardian that she wants business owners to easily discover how their business is performing. "Square wants to make commerce easy for everyone and help businesses start, run, and grow. By offering them free analytics, we enable merchants to see what items are selling well and when stores have the most customers," she said.

"This is crucial in helping business owners make efficient decisions about store hours, staffing, and ordering."

In truth, Square needs to create more of a fuss around its big data analytics. This is because not only have the company found a way of making their services cheap but their customers – business owners – can understand their business easily. If you visit the front page of their website, analytics receive no mention at all.

Charmaine Yu is another small business owner who uses Square. She co-owns Elite Audio in San Francisco and opened the café almost two years ago. Unlike Walsh, she kept research to a minimum and almost forgot about how customers would pay. "We had a bit of a panic and my husband went to go and buy a cash register the night before we opened," she told me.

As her café was only around the corner from Square's HQ, the company soon delivered a free card reader directly to her store. But she didn't really understand how Square worked and customers were able to choose between three different credit card payment options for half a year. The other two services were provided from free trials.

It was only when a young man came into the store and specifically requested to pay by Square that Yu truly considered fully implementing the technology. Ironically, the reader did not work but within an hour Square engineers came to the café and fixed the reader, also providing an explanation of Square's advantages. It turned out that the young man was Jack Dorsey.

"We transitioned over to Square somewhere between 6-8 months after we'd opened and we've not looked back," Yu said.

Why? Square gave Yu access to easy-to-understand analytics about how her store was performing and has already instilled changes as a result:

"We have a policy that at the end of the day, our employees could take whatever they want home. We found that the chocolate croissants were getting bought quite early on and the baristas were taking the butter croissants home."

Another insight that we learnt was that for some reason (and we have no idea why) Thursdays are consistently our busiest day. We essentially changed our staffing to accommodate it and we have an extra barista on all day Thursday. This is just the kind of information where it would be difficult and time consuming to compare Monday through Saturday, consecutive weekly orders."

Walsh also praised Square's simple analytics dashboard:

Square gives you all the data – it has a really nice user interface that lets you see what your busiest time of the day was. We use that as we bake and so we can plan accordingly so we don't bake too much. …We suspected that we would more customers if we were to open earlier and so we checked our Square dashboard. In one second, we could see how much our sales were at an earlier hour and so when we did that, we decided to open an hour earlier.

Square's limitation? Big business

Square processes more than $15bn payments (£9.4bn) annualised, an incredible number considering the company has not even existed for five years. Despite this, many have argued that Square's offerings are somewhat limited.

Although Walsh has seen great benefits in using Square, she's now considering a new point of sale (PoS) service because of her own company's growth. While she previously only ran a café, she wants her PoS to automatically connect to an inventory for the grocery, something that Square doesn't yet do. Square did not comment on whether they would specifically be introducing an inventory function.

Walsh also added that to get more specific analytics, customers have to download an Excel spreadsheet. This is miles from the simplicity their dashboard is meant to represent.

Square could also be very useful for business owners who have multiple franchises. If they could compare each of the businesses on one single page to analyse trends (such as areas of difficulty or items that are selling well across all stores), that could be a valuable tool. This appears to be a service that is not currently offered.

Final thoughts: it's getting there

Square has come a long way since it first launched and has managed to convince big companies such as Starbucks to invest. The company is also doing a lot to disrupt the payments industry by offering a unique flat rate on all purchases.

That Square also provides a fairly easy-to-understand analytics package allows business owners to take away valuable insights about how their shop is performing and areas they should improve. The company should also do more to make the most of case studies where customers have been able to cite Square as the very reason for increased revenue.

But the company's youthful naiveté is still apparent and it is clear that Square has a long way to go if they are to compete with the biggest PoS operators. A number of shop owners complain that they often struggle with the card reader (with their customer service not always quick to reply) and there are limitations for owners of multiple shops.

But Square is young and has time to grow and develop further still. We know that customers can use the data analytics to increase their own revenue. It will be interesting to see if the company ever shows us how they are using the data they have – after all, $15 billion-worth of payments gives the company an incredible trove of information.