Tuesday, May 11, 2010

Square Aims to be Credit Card Value Disruptor

This is an update to my initial blog post (April 7, 2010): Is Square the Bank of the Future?

Today (May 11, 2010), Fast Company has published: "Square Brings Credit Card Swiping to the Mobile Masses, Starting Today"

I highly recommend this article and the accompanying article "Getting Square: A Guide to the New Mobile Credit Card Payment System for iPhone and Android" to better understand Square's business model.

Here are some highlights:

With Square, anyone can accept credit or debit card payments by downloading the app and plugging a little plastic cube into the headphone jack of an iPhone, iPod Touch, iPad, or Android phone. After a quick swipe of the card through the reader, the merchant turns the device over to the customer to sign his or her name on the touchscreen using a finger instead of a pen. The customer can add a tip, either by percentage or a particular amount, and then enters their phone number or email address. In the best case, the receipt message will buzz in the customer's pocket as an email or SMS text message while walking away with their purchase.
Customers are charged as usual by their banks or credit card companies, and Square settles up the net funds with merchants each night instead of at the end of the month. The swiper and application are both free and include access to an online dashboard with analytics that help merchants track exactly what they've been selling.
Square shares very little about you with the merchant, and doesn't even keep your credit card number on file. Although a phone number or email address is needed for the transaction, that is not shared with the merchant, only with Square. [Alan: Square can therefore become a CRM service provider] 
At the same time, Square gives the merchant just enough to recognize repeat customers and offer them incentives. In the dashboard, a merchant can customize a notifier for, say, every tenth visit by the same customer or any time a customer spends more than $100. This notification will appear on screen after the swipe and allow the merchant to offer a discount or giveaway. [Alan: Square can enable loyalty]