It’s Hip to Be Square!

by Scott Loftesness on December 1, 2009

in Innovation, Merchant Acquirers, Square

Scott Loftesness

So you really want to be a merchant – and accept card payments simply and easily? Jack Dorsey wants to be your friend. Hope you’ve got an iPhone!

Earlier today, Dorsey and friends announced the launch of Square. Dorsey, co-founder and chairman of Twitter, is certainly a celebrity founder and CEO. TechCrunch notes that apparently Square is worth something like $40 MM – before they’ve launched.

What’s all this excitement about? According to Michael Arrington’s TechCrunch post: “What PayPal was to eBay, Square is to the real world,” said one person close to the company.

Square seems to be aiming at democratizing merchant card acceptance for physical face-to-face card transactions – a heretofore arcane marketplace that required folks like you and I to qualify for traditional merchant accounts from merchant card acquirers.

PayPal did exactly this almost 10 years ago in the online, ecommerce space. It enabled folks like you and me to be able to accept payment cards in real time – for non-card present payments.

The promise of Square is that I can do the same thing – but, with my iPhone, accept payments cards in a physical, card present environment – and that I can do so with a truly minimalist setup, not requiring the overhead of qualifying for a traditional merchant account. Suddenly, all the parents at the school bake sale can pay for their cupcakes with their debit cards via my iPhone as the POS terminal.

What’s not completely clear at this point is how Square is navigating the existing card company rules to be able to pull this off. But they appear to be doing so. As Arrington notes: “The green field potential is massive.”

Square includes several other interesting features. Email and text receipts – instead of paper. Photo verification of participants. A built-in merchant loyalty scheme that allows Square acceptors to define their rewards. Charity donations – a penny per transaction to the charity of your choice.

At the point, Square is in a limited beta. You can request participation at the bottom of Square’s web page:

Square is innovating card acceptance on several fronts – we’re excited about the possibilities. It’s yet another example of the iPhone as the platform for mobile innovation! Meanwhile, follow Dorsey and Square on Twitter for the latest updates.

How about you? Are you signing up for Square?

13 Responses to “It’s Hip to Be Square!”

  1. direwolff says:

    scott, where’s the analysis? 😉 as you’ve suggested, not sure i see much innovation beyond what paypal did and the fact that they’re doing on an iphone (which paypal could also do today).

    are they really getting away w/breaking the card rules here? is this a case of them setting up their own merchant account and letting all of the merchants they authorize ride through their account? hmmm…

    time to get your industry contacts to work unearthing the meat here 🙂

  2. Wolff, hard to know, isn’t it? Like you, we’d love to hear more from “industry contacts” about what Square is doing!

    Did you sign up to be a beta participant?

  3. Hi Scott — Thanks for sharing your thoughts — I had the same reaction: desire for details about the how and at what cost?. After being entertained and swept up into the idea of finally bringing “design” to the POS payment experience, I actually flipped back to the consumer side, and started thinking that the interesting application of having a swipe card reader on my phone is to replace my wallet and the physical cards altogether and carry that information with me to use anywhere… online or off… It is a busy space obviously, but why not bring design to adding a card to PayPal, Zong or Obopay, etc… In the simplest sense, why not load my cards on my phone?

  4. Albert, good thoughts! The challenge with loading your cards onto the phone seems to revolve around whose application is holding all of that “valuable (think PCI) data” on your phone – and how do you select among your cards and reveal just the right one at just the right time to a card acceptance POS device?

    • Scott, yes I completely see the challenge… and the opportunity. 🙂 I guess I see the partnerships to make that really work securely as still shaking themselves out… in the end the card/credit line/bank account will probably be tied at a different point in the ecosystem for all the reasons you mention..

  5. vacher says:

    Square is a magnetic stripe reader … what about the chip which is mandatory in many European countries ?

    • Mordy Kaplinsky says:

      Square is essentially a two-part solution.

      The first is that like PayPal they created a single merchant and assume all liability for additional merchants to use their account, with the hash tag identifying the particular merchant.

      The second is a standard credit card terminal in a software version with the magnetic stripe reader contained in the square hardware which enables card present transactions. This is something that you can currently do with most standard payment gateways if there is a card reader attached and when implemented correctly is fully compliant with association and PCI rules.

      Similar more expensive hardware add-on’s have been available on the market for many years, although most of them are pricey. The tight integration with the software on the phone with Square is nice along with the more interactive user experience, and differentiates it from products currently on the market.

      The only real novelty is the ability for anyone to have an account and the ease of creation. I can see the benefits for peer-to-peer payments, although carrying additional hardware around on a daily basis on the chance that someone wants to give you funds is questionable and PayPal suits those transactions fine. On the other hand most merchants already have existing POS credit card terminals and merchant accounts, so what novelty does it really provide aside for niche scenarios which require a more mobile solution?

      Unless I am missing something, it seems that Square is more hype then truly the next big thing.

      • Rahul Bhargava says:

        Mordy, agree with you. Wonder what business is Square in… hardware device manufacturer or a merchant account provider or both? If they are indeed a “Master Merchant” for everyone accepting payments, who is their acquirer? And while they might give away the low cost device, what are they going to charge people for accepting card payments? Lots of questions…

      • Liz says:

        True, most merchants already have a merchant account. Sage came up with an alternative called Payment Boss ( which allows customers to accept payments with their mobile phone but you can use it with your existing merchant account. All payments are kept in one place. POS credit card terminals are expensive (approx $20-$30/month plus transaction fees plus air/data time costs), but the Sage option is only $9.95/month flat.

        I think the mobile type of solution, like Square or Payment Boss, is more suited for those who do business on the road, eg. Sales persons/business owners visiting clients, trade show. For individuals who aren’t on the road, the mobile option can offer a certain convenience or costs savings in comparison to the higher fee credit card terminals.

        Does Square or other payment processors integrate with some type of invoicing software? I remember when I had used my banks’ CC terminal, I could never keep track the payer/customer who paid me as I am just provided with the last 4 digits of the CC# or the amount in my bank statements. I know Payment Boss is integrated with their sister online invoicing tool Billing Boss ( Every time I accept a payment on the mobile phone, an invoice is automatically created in Billing Boss and I can keep track of which client paid me, identify my highest paying customers, and even build a CRM of client contact info when accepting payments. It would be definitely useful for businesses if payment processors offered this capability.

        Full Disclosure: This author has been compensated by Sage. I am their Social Media Consultant but I was using their product well before they contracted me. They found me when I sent them an email praising them about Billing Boss.

  6. Mark Rose says:

    There is always room for making things simpler. Really happy for Jack and team with this new product – I am sure they will do tons of testing and interations on the product to fulfill on a simple premise: make payments easy.

  7. Nico Pahl says:

    Agree with you Mordy – has a slight tinge of novelty factor about it, given most peer to peer and micro merchant transactions can be readily serviced with already existing solutions.

    But am watching this development with interest!


  8. Jeff Fonseca says:

    There is a lack of details about how they fit into the card industry rules, but I have to wonder that with the examples of Paypal above, why would Square go thru the problems of trying to create that eco-system inherent with fraud and risk. When in fact Paypal just opened up their applications to 3rd parties, which could allow Square to just be a front end component of a fairly well established Paypal engine, that already has agreements with the associations, as well as their own fraud and risk management. Otherwise, they are going to go thru the learning curve of trying to build all this competence themselves while they also try to acquire customers, which does not seem practical to me.

  9. I’ll be recommending Square to my clients as soon as it’s tested and available in Australia!

    Lots of questions to ask, but I’m sure they’ll figure it all out, and probably get bought by Google or something sometime soon.

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