Many businesses place a minimum on the amount a retailer has to spend while using a credit card. This is because on small purchases, it can cost merchants up to 50% of the retail cost. However, it is likely that in the near future an increasing amount of small businesses will be finding a new solution for credit card payment. In fact, several small businesses around the country have already turned to mobile payments start-up Square as their answer for credit cards. Some examples of such businesses are Geekwise, Rotary Storyland and Playland, and Spin City Cafe.
Square charges a standard fee of 2.75% per transaction, and there is no minimum amount or monthly fee. The start-up company, by Twitter co-founder Jack Dorsey, has reached 1 million transactions for the month of May. It also processes $3 million in mobile payments per day. Anyone with a smartphone can purchase a Square Card Reader from their local Apple Store or sign up to have one mailed to them for free, and then swipe any valid credit card and have money transferred to their account.
This may worry some people. You may wonder, “What happens if I pay for dinner with a credit card and they swipe my card with their phone and take money?” However, this would not be smart for the person trying commit the fraud, because it can easily be traced back to their account. It is highly recommended to keep an eye on your credit card bills to make sure there are not any unauthorized Square transactions.
Initially, rival payments company, VeriFone, accused Square of having low security and stated that they should recall their card reader because it did not encrypt credit card data. In his rebuttal, Dorsey claimed that VeriFone’s accusation “overlooks all of the protections already built into your credit card.” He also stated that users are not responsible for fraudulent charges, and outlined ways in which credit card fraud could still be committed with encryption. Since then, Square has endorsed the Visa guidelines, which requires applications to encrypt credit card data at the card reader level. Square has also received a strategic investment and seal of approval from Visa. Even though the company has added encryption to their new readers, they have not recalled their old ones because they claim they are still secure.
Square has recently released Square Register for Businesses and Square Card Case for consumers. Square Register aims to squeeze out the traditional cash register. The software application for the iPad eliminates the costs of credit card equipment and monthly fees from credit card transaction companies. There is also no minimum fee per transaction. Other advantages are that Square Register is more portable than traditional registers and offers in-depth analytic data on traffic trends and costumer buying habits.
Square Card Case is available to consumers at any participating merchant location but is not available through the App Store. Users can make a digital collection of “cards” for all of their favorite participating locations. Consumers who use the Card Case will have access to a daily feed on offers and products from the places they shop, data on their purchase history, receipts for each purchase, a map of where the companies are located, and contact information for each location. Customers will be able to check in at restaurants and any food they order will be added to their tab on Square. They will later receive a text message notifying them of the charge. The App is available on the iPhone and will be released for Andriod soon.
Will Square take over credit card processing for small businesses? Although many are already claiming that it will, it is a bit too early to say for sure. It would not be surprising, because the company seems to have a good handle on the market. It could not have introduced its products at a better time, and has reacted well to feedback from consumers and competitors. Square is continuously advancing its applications and developing more convenient and innovative ways to process credit cards. It is undeniable that applications like the ones offered by Square have a place in our environment. They offer new advantages over traditional methods to both businesses and consumers. However, Square will not be alone for long. There will soon be similar cell phone apps launched, such as Google’s NFC-Powered Digital Wallet. Only time will tell what will come of credit card payment at small businesses.