Square's 'virtuous loop' is beyond payment processing

Jack Dorsey disrupted communications when he co-founded Twitter. He disrupted payments when he launched Square's credit card-reading dongle. That business was itself disrupted, with a slew of rivals in the market, including behemoth PayPal. But now, by expanding from payments to all sorts of services for businesses—from providing capital, to food delivery to customer service tools—Square has landed back on CNBC's Disruptor 50 list. (Tweet This)

Dorsey's vision is creating what he calls a "virtuous loop" of various services designed to help businesses grow their revenue, with Square taking a cut every step of the way.

"A payments customer, for instance gets an email that says 'Hey would you like an advance of capital? Would you like $5,000 to help build your business?' They click on yes, the money is deposited in their bank account the next business morning. They buy a new salon chair, they buy the new espresso machine, whatever they want to do with the funds," said Dorsey. "That actually generates new sales, which goes back to the payments business as well."

Square's newly diverse range of businesses is taking on some deep-pocketed rivals. The company's payments services compete with everyone from AmEx to PayPal. Its Caviar food delivery service, which it acquired last year, is edging into GrubHub's and Seamless' space. Its recently launched email marketing tools compete with MailChimp. And the capital financing services it offers go head-to-head with PayPal's Working Capital, Lending Club and OnDeck.

Read MoreSquare expands small business financing program

"We have a number of businesses that actually empower and enforce the other. We'll end up having a majority of our sellers being able to see value in more than two business lines from us. From a company standpoint that speaks to a greater resilience. That speaks to a greater sense of building something that has scale and can also resist any weathering in the market," Dorsey said.

Since shutting down Square's Wallet app—designed to make it easier for people to pay for things—a year ago after it failed to gain wide adoption, Dorsey has been focused entirely on tools for sellers. That means that Apple Pay, instead of being a competitor, is a key partner. "Now it's our job to make sure that all of our sellers are empowered to accept it. And we will build hardware to enable our sellers to accept Apple Pay, which we're excited about because it further reduced the potential for fraud and risk, which reduces the cost of the system."

Dorsey said his management of Square is greatly influenced by his time at Twitter. "We did a lot of things right and a lot of things wrong. Everything I learned there I built right into this company. And then we learned a bunch of new things as well." Dorsey said the most important thing he learned at Twitter goes back to its early days of frequent site outages marked by the "Fail Whale."

Read MoreSquare expands into small-business marketing

"The first line of code I wrote in this company was our admin dashboard, so that we could show exactly what's happening internally. The reason we went down a lot early on in Twitter's history is because we were flying blind. We had no instrumentation. We couldn't not tell what was happening with this system. As soon as we instrumented we stopped speculating and we knew exactly what needed to be fixed and why. Then we fixed it and uncovered something else that was broken."

Dorsey's only comment on Twitter's business and CEO Dick Costolo was to say he's confident in the company's leadership and direction. As to how Twitter's IPO influences his perspective on bringing Square public, he wouldn't share any specific plans: "I learned a lot in that process. I think Twitter did a fantastic job in that and we had great support. Everything that we did there certainly applies to how we would think about it here."

One part of Twitter Dorsey was eager to talk about was its live-streaming video app, Periscope, which he says he loves. "I think it's the closest thing we have to teleportation. It's everything we love about Twitter: its simplicity, the fact that it's live, real time, and it's conversational. Periscope is an amazing manifestation of that. Just the fact that it's video as well, and you can actually be there and hear it and feel it and see it—is awesome."