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Square up with mobile

Famous for its mobile payments solution, Jack Dorsey’s Square is already exceptionally popular with merchants in the US. For several years the innovative payments dongle has allowed small businesses (or even one man bands) to accept card payments through their mobile phone securely and with ease.

However, the company’s latest offering, Pay with Square, elevates this technological innovation to a whole new level. Interestingly, Pay with Square enables customers to pay using just their mobile or tablet device, without any physical transaction needing to take place. Users register their card details to Square’s system along with a photo of themselves. They can then sign into a smartphone app which tracks their location via GPS, alerting merchants when someone using Square walks into their shop. Simultaneously, the customer’s photo comes up on the screen of their mobile device, meaning all the cashier behind the till has to do is verify the customer’s photograph and name when they arrive to pay. The system is already used by 75,000 merchants across the US and is growing in popularity each day – despite the fact that it’s something which is only in embryonic stage in the UK.

Should Pay with Square gain pace globally, it truly does seem to herald the beginning of a cashless society. It’s a major step forward from similar developments, such as Apple’s EasyPay, which allows customers to scan the barcode of an item and pay for it with the credit card associated with their iTunes account. Whilst there will always be issues to iron out with such cutting edge technology, by making the payments completely card free Square provides an extraordinary added layer of customer convenience. Pay with Square also combats many of the security concerns expressed about traditional ‘wave and pay’ NFC mobile transactions, by making the method of payment truly personal whilst difficult to replicate.

With over two million people in the US alone using some form of Square technology for everyday payments, it might seem likely that the trust already inherent with the brand name would ensure that Pay with Square soars in popularity. However, the fact is that this kind of radical innovation is forcing users to completely change their buying habits – something which historically doesn’t happen overnight. It took fifteen years for debit and credit card payments to become a mass alternative to cash, and whilst it’s unlikely Pay with Square would see the same time period there are certainly issues to overcome in the US, let alone the UK. Consumer education is necessary to raise confidence in new types of mobile payment across all territories, and this can only be gained through examples of best practice. Large numbers of people need to see firsthand the benefits offered by radical payments technology, such as through the mobile terminals on offer at this summer’s Wireless Festival or the Olympic games, for trust in mobile to continue to grow.


Comments: (3)

A Finextra member
A Finextra member 20 August, 2012, 10:08Be the first to give this comment the thumbs up 0 likes

I am curious as to how this is supposed to work in an EMV oriented world.  Instead of chip and PIN you have, effectively, "pseudo" manual entry or Card on File at Square.  This means, under current European rules:

- higher interchange  (Square will surely not be storing the CVC2/CVV2?)

- no liability shift to Issuer.


John Dring
John Dring - Intel Network Services - Swindon 20 August, 2012, 10:42Be the first to give this comment the thumbs up 0 likes

Finally a good implementation of location in a payments service.  And identification backed via old fashioned face recognition.  Just like when you walk into a local store where they know you.  Truly hands-free like when the storekeeper(or landlord) just put it on a tab and you settled later in the month.

I wonder what the transaction limit is for these transactions?  $25.  After that a PIN challenge can be added to the flow for non-repudiation and lower debt risk.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 20 August, 2012, 14:59Be the first to give this comment the thumbs up 0 likes

Not just Pay By Square, but all mobile wallet instore payments are reportedly considered as CNP, thereby attracting higher interchange fees. In the case of SQUARE, iZettle and others who bundle a merchant account, this shouldn't matter since they anyway charge a flat fee of around 2.75%, which exceeds both CP and CNP interchange rates. However, it would matter in the case of mPowa, Google Wallet and others who don't bundle a merchant account and follow an interchange+ pricing model.

It could be argued that Pay By Square already provides 2FA - physical possession of smartphone and face recognition - so there shouldn't be any case for stipulating upper limits on transaction sizes in either EMV or non-EMV worlds.

Since merchants are responsible for face recognition in the case of Pay By Square, it's only natural that they should bear the risk of fraud. No different from recognizing the signature on the backpanel of the plastic card in the non-EMV world.

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