As discussed some time ago, Jack Dorsey’s new startup for mobile payments, now officially called Square is moving forward. (See posts 2009.21, 2009.25 and 2009.42) The website went live this afternoon as reported by Tech Crunch.
The details appear to be very similar to original expectations. A small dongle connected to the microphone port of any device allows for clients to swipe a credit card, for payments. The program is in beta and the website doesn’t indicate much else.
Their are some real benefits to consumers here:
- No fee for the service = free is always good
- Uses can see receipts online = useful for tracking and searching
- Vendors can track loyalty of Square users to their business = potential rewards for loyalty
- Emailed / Texted Receipts = no paper used and less trash
- 1 cent of each transaction donated to charity of choice = social responsibility points
- No power drain on phone as unit is powered by swipe = less mobile charging
It also provides upside to businesses based on what’s on the site, but details are still sketchy:
- Signature verification still used = 1 point of verification to which consumers are accustomed
- Photo Verification – device seems to show photo of payee = 2nd point of verification
- Ease of Entry – Small biz can run anywhere with just a mobile and take electronic payment
- Virtual Loyalty Program – some indication of user tracking = rudimentary understanding of client base
- Hipness factor = seriously, I’m takin’ your payment on my mobile
All these items are goodness, and full marks to this organization for looking at things differently. It’s a great effort, and the results will be very interesting.
Now let’s ponder some of the open questions:
- Transaction Fees – Square appear to avoid the whole cost splitting situation among banks, mobile phone companies, payment processors, and others by going around the current paradigm. Great! This is free to the consumer. Someone needs to pay for this transaction. Nothing is free. Who is paying for this? Is it the retailer? Is Square selling mined data in some way? Is it advertising based?
- Platform Fees – What are the fees to the retailer/consumer facing organization, if any? High credit card fees being charged to businesses are a big issue in Canada these days. If you are using a card, the retailer pays in some fashion. Does this change that?
- Hardware – From whence comes the dongle? Who pays for it? How do we get it? How much does it cost for the consumer? What if I lose it?
- Usability – Looks straightforward on the site, but it still needs to pass the I’m in front of 5 other people in line and I can do the transaction in seconds. This means I have to have my phone ready, the dongle ready, my card ready, and the app ready. Now you tell me the amount, indicate how I pick you as the vendor, I swipe my card, do my signature, you look at my photo and agree and the we wait while the payment processes. This will not be as fast as transactions on the current system at POS terminals, and will probably not work well in high volumes based on the model portrayed. It also fails the “so simple my mom can do it” test that I recommend for in store retail payments. If it isn’t simple at the front end of a retail establishment, it will be difficult to obtain consumer acceptance.
- Security – The signature on a touchscreen will be interesting. Most of us sign with a pen, and not our fingers so the signatures could be questionable. The photo ID is a great idea assuming it goes quickly from one unit to the other. This scenario will also involve passing ones card to the payee, which is to be avoided for security purposes (see contactless and EMV) EMV is a whole other question. Not currently slated for the US, EMV is a necessity in other countries like Canada. This would require a re-think of the dongle to a larger unit – in fact it would be almost as big as an iPhone no matter how you look at it, as the card stays in with the chip in contact with the terminal. That would be a game breaker.
No matter what happens next, this is a laudable attempt at mobile payments, and one has to cheer an organization just going for it. The beta program will be closely watched!