Payment systems for Web-enabled smartphones have been something of mythical
unicorn in high technology, but a new company hopes to change that with a
device and application geared to enable credit card payments on Apple iPhones.
Square, founded by
Twitter co-founder Jack Dorsey, Jim McKelvey and Tristan O-Tierney, came out of
stealth mode Dec. 1 with an appropriately boxy magnetic reader gizmo that plugs
into an iPhone headphone jack.
Users make a purchase by swiping the credit or debit card through the
reader, which would be plugged into an iPhone that has the Square payment
application on it. The reader parses the card data and converts it into an
audio signal, which is picked up by the phone's microphone and onto the Square
app.
The data is encrypted and sent via Wi-Fi or a 3G connection to Square's
servers, which talk with payment networks, including Visa, Mastercard and
American Express. The purchaser signs for the transaction with their finger on
iPhone's touch screen.
Dorsey told Om Malik no info is stored on the devices. This hurdles a
big security concern because the devices are small and may be easily lost.
Merchants don't see the credit card info either.
When users make a purchase, they will get receipts sent to their e-mail or
mobile phone, where they may access them securely online. Payers can also use a
text message to authorize every payment.
Dorsey also told Malik that he envisions a world where merchants and
consumers would use Square to engage in transactions:
"Dorsey has big ambitions and wants to enable a people-to-people
payment system that marries the convenience of 'plastic' and 'mobile devices'
for everyday transactions. He noted that often on Craigslist you buy something
that costs a few hundred dollars—say, a couch. Carrying that much cash for a
purchase can be a risky. On the other hand, if the seller has a Square credit
card reader and the Square app installed on either an iPhone or an iPod touch,
then she can easily accept credit cards."
While Square works solely on the iPhone today, Square is looking to hire client
engineers to port the app and device to Google's Android platform and Research In
Motion's BlackBerry platform.
Dorsey has drummed up a great deal of
press for this device in a short amount of time. More than that he has
cultivated some participants in downtown San Francisco
who agreed to support Square. SightGlass Coffee, in which Dorsey is
conveniently an investor, is one
of them.
Will Square take off across America
and then the rest of the world, or will it die in the coffee shops and other
small businesses in and around high tech's urban mecca or San
Francisco? It's unclear. Mobile payment provider Billing Revolution sees holes in Square's model.
What Square has made clear, or at least reinforced for the umpteenth time,
is that smartphones such as the iPhone, the Motorola Droid and other gadgets
are paving the way for new opportunities in mobile computing.
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