2011.42 | How Square’s Card Case Works

I was intrigued by the recent release of the Card Case App from Square.  Unlike the other mobile payment apps that involve tapping a mobile device or card on a contactless reader, Card Case attempts to remove the tender process from a transaction as much as possible.  While the mobile device has to be on their person, there is no need to pull out a wallet or a phone to complete a transaction.

Here’s how it works:

  • Users connect a current credit card to a registered account with Square that includes all of their personal information including a photo of themselves.
  • Users install the Card Case App on their iPhone or Android device.
  • Users can search out local businesses where they shop directly on the app on their mobile device.
  • Users can turn on ‘Always Auto Open Tab’ for merchants they frequent to enable purchases ‘over the air’.
  • When users are within a store where they have activated this ‘Always Auto Open Tab’ with their phone, the proximity of their mobile device to the store point of sale device causes their name and image to show on a list on the screen of the point of sale unit.
  • When a user wishes to complete a transaction, the user tells the cashier to put it on their tab, using their own name to identify themselves.
  • The cashier consults the point of sale device and identifies the user by their name and image that shows on the point of sale device.
  • The cashier selects that user, and the transaction is completed.
  • An eReceipt is provided to the customer via Square.

This payment solution is really a very clever way of getting away from the traditional pass of a card or currency from a customer to a retailer.  I would personally love this to become a standard payment.  I would use it in a second if it was available in my area.

Let’s consider some of the potential issues around this particular solution, to understand if it could become mainstream.

  • Integration Effort – Retailers must register with Square to accept payments via the Card Case solution.  Fees are low at 2.75% (3.5% with a card swipe), and make a lot of sense for smaller retailers, as they can replace a potentially more costly ‘traditional’ solution.  However, if we consider tier 1 and tier 2  chain merchants with significant scale, they already leverage current payment processing platforms.  Using Square is an additional payment scheme that has to be accommodated at a store.  Additional schemes mean additional cost and effort to implement and support.  They mean additional training for store staff.  They mean integration to current point of sale software platforms.  While retailers accommodate as many schemes as they can to suit their customer base, there is only so much complexity that can be handled.  Verdict: For the time being, I expect this to be more of a neighbourhood merchant solution, though inevitably someone will give it a try.
  • Connectivity – A mobile payment scheme like this assumes connectivity by default.  If either the user or the merchant loses connectivity for any reason, the mechanism to accept a payment is unavailable.  While connectivity is definitely improving across the board, it is by no means foolproof.  Most top tier retailers require a solution with very high uptime or at least some significant redundancy. Mobile signals can be dicey in some locations, no matter what carrier or device you use, there is a chance that in some locations it just won’t work.  Verdict: Given connectivity today, mileage will vary by location.  Some sites in subways or in the basements of highrises may not be able to use it at all.  This technical challenge will make it challenging for the solution to become common.
  • Errors & Scale –  In large cities or in very busy sites, there may be so many users in proximity to the store that the lists could become unmanageable.  In busy situations, it is also possible for cashiers to accidentally select the wrong user given many more to choose from.  Verdict: While unlikely that there will be so many users using the service at present, given significant population density and the busy nature of some urban businesses, popularity of the solution could render it more difficult to use for the cashiers.  I’m sure that issue could be dealt with.
  • Fraud & Security – While paying by name and image may be simple, streamlined, and civilized, it relies heavily upon a cashier’s personal discretion.  In the case of a small neighbourhood merchant, that may work just fine.  When you are a huge multinational retail organization with tens of thousands of employees across the country, the continent or the world, it’s a different story.  No matter how carefully employees are vetted, there are always bad apples. Based on current information, there is no mechanism beyond a cashier login log to discourage cashiers from assigning a charge without the permission of the user.  To take it a step further, users could be charged without even being in the store.  A user standing near a store could be charged by a cashier without any knowledge whatsoever.  While the user would inevitably be tipped off by an ereceipt, and the user would obviously only activate tabs at sites they trusted, security is still a valid concern.  Verdict: The sort of trust required for this sort of solution means it will have to stay small scale with trusted retailers.  If it expands to larger retailers, either users won’t turn on the automatic tab option, or there will be more fraudulent charges than it is worth.

I doubt that the intent of the automatic open tab functionality was to have it leveraged in a large scale retail implementation at all.  The trust requirement to make this solution work is a fundamental flaw for larger players, but it’s a novel idea all the same, and I hope it is successful enough that I can try it locally.

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