Square Mobile Payment Service

Launched on December 1st, 2009, a new payment processing app called Square hopes become the PayPal of the smartphone era. Created by Twitter founder Jack Dorsey, Square is a simple credit card reader and software combo that works on the iPhone, iPad, iPod Touch and Android platforms.

In order to “square up” on a payment, all you have to do is plug the free credit card reader (that they send to you upon enrollment) into your audio jack, launch the Square application, select the amount to charge and have the card owner sign the screen, just as they would sign a receipt.

While the company is well funded by Khosla Ventures and a “team of angels,” their progress has not been without a few roadblocks. Dealing with mobile credit card payments brings a great amount of risk to the company, as well as lots of opportunities for fraud. Nevertheless, Square claims to meet and exceed all industry-standard security practices when it comes to payment processing.

As for other early problems, the Square support site tell us the following about the hardware and risk issues:

Until recently, Square was facing a big hardware shortage, but that’s now coming to a resolution. The problem has transitioned to something we’ve been working on simultaneously, a credit processing and risk issue: we need to strengthen our underwriting infrastructure so that we can handle the huge demand for readers and still manage the risk of chargebacks and fraud. This is the last thing preventing us from shipping readers as fast as we’d like, and we have almost the entire team working on it.

Finally, there are already challenges to the relevancy of the technology itself. With rumors that Apple is already testing the functionality of near-field communication (NFC) chips for the next-generation iPhone, we may see a more streamlined payment processing platform built right into upcoming smartphones. This would surely put a damper on the external hardware services like Square.

NFC is a technology that allows users to basically send information wirelessly between phones at a maximum distance of about four inches. This is ideal for a mobile payment solution and the industry is already shifting focus onto NFC as the successor to physical credit cards.

Square Mobile Payment Service

Can Square overcome all of these obstacles and gain a place at the top of this emerging industry? Time will only tell, but one thing is for sure; mobile payments are going to be huge in coming years. According to CreditCards.com, mobile payments are expected to skyrocket to almost 4.5 billion annual transactions by 2012.

On another note, my card reader is on the way from Square, and as soon as it arrives you can expect a more detailed review of the service. Stay tuned and stay square!

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  1. Liz says

    I love the concept of Square! I personally think Square is great for small businesses that do not need to quote clients ahead (ie. restaurants). However, for businesses that need to provide quotes/invoices to their customers before accepting payment, and who need to manage their cash flow (who paid and who didn't), I think an invoicing solution integrated with a mobile payment tool (used with the phone) would be more suited. An example is Sage Software's Payment Boss (http://www.paymentboss.com).

    I wholesale jewelry and sell to end customers at events. I send quotes and invoices to my wholesale clients, and collect payments from them with my phone or by cheque. At events, I just use the mobile payment tool on my phone. All my customer and account receivables are managed in one place, so it's much easier to track everything.

    I run my own business, and Sage asked me to share my experiences with Billing Boss with others. So here I am. Please note: This author has been compensated by Sage.

  2. Mike Wils99 says

    A professional colleague of mine started using Square recently at my recommendation. I have not processed any charges yet, but he has processed some large (read $10,000+ ) charges and he was VERY slow in getting paid by Square. He had to threaten a lawsuit in fact. What's up Square?

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