Twitter co-founder's 'Square' comes into focus

A test 'Square' in action, and a screenshot of the geo-tagged receipt.

(Credit: Engadget)

Well, we finally have a glimpse at "Square," the new mobile payments venture coming from Twitter co-founder and chairman Jack Dorsey. As expected, it's a little hardware add-on that can turn an iPhone into a credit card reader.

The funny part: Details about the small-business-oriented project have been on the Web for months. It was just that nobody had put two and two together until some eagle-eyed folks at Engadget realized that a URL on a screenshot of the "Square iPhone Payments Venture" first reported by Coolhunting matched a domain registered to Dorsey.

Dorsey, who stepped down as Twitter CEO almost exactly a year ago, is headquartering the company in New York, though we hear he already has employees in both Gotham and San Francisco. Its Web site will likely be located at SquareUp.com. Currently, that site is a collection of links to a smattering of businesses, including Sightglass Coffee, a new San Francisco coffee shop in which Dorsey has invested. (Wanna bet they're testing Square out there?)

From Coolhunting:

The innovation is in a small, plastic card reader that fits in to the headphone jack of an iPhone (or iPod Touch) and transfers the credit card's swipe data to the app. After the employee enters the amount to charge, the customer confirms by scrawling their signature with their finger and then either one enters the customer's email address to send the receipt to. The payment is processed by Square for a small percentage plus a fixed fee; the funds are transferred directly to the store's bank account, cutting both time and complexity on the processing side. The customer's receipt includes a map showing the location of the transaction which is handy for those who record, sort and file such things.

We heard that the venture is being called Square rather than "Squirrel," its originally reported name (according to TechCrunch's MG Siegler, this is because it looks kind of like an acorn) due to some unclear legal-copyright-licensing-whatnot issue. CNET News first reported the name change along with the news that Dorsey had been an angel investor in location-based mobile navigation start-up Foursquare.

Funding a hardware venture is typically more expensive than a Web-based one for obvious reasons: the up-front cost of production and manufacturing.

But two sources with knowledge of Square's logistics said that Dorsey believes he can keep production costs extremely low, possibly manufacturing a "square" at a cost of about 40 cents apiece. The company may then even give the devices away for free, making money instead on transaction fees. That's the old Gillette razor business model--make the razors cheap or even free, but replacement blades more expensive.

Regardless, we hear Dorsey has been working on a funding round.

[Jester_Paul]

Why didn't they use the iPhone dock instead for their accessory? Still a very cool idea, can't wait to see how it turns out.

[sflocal]

My guess (and a vague one) is that the interface utilizes the microphone as the input method. So it translates the swipe to analog and "listened" on the microphone. Probably an easier and cheaper way than to use the dock connector which is more complex and expensive to manufacture. It's actually quite a cool idea.

[JeffDS3]

It probably works like the TDD adapter, just converting one signal into another. Pretty smart. Plus it leaves the dock open for chargers/batteries/other accessories.

[mrcockrell]

much cheaper to make headphone jacks

[Seaspray0]

I think the concept is absolutely brilliant... but I worry about people having access to a portable card reader. "Swipe and steal" might become a common phrase. I'd rather they weren't given away.

[noesnoesnoes]

What next? Twitter starts sending ads to people via updates, and then links it in with this micropayments system?

The biggest problem is that you need to buy a physical accessory, and historically, you can't get the masses to buy an accessory.

[Jay Jennings]

I don't think this is meant for the masses, it's meant for vendors -- and as a vendor myself I'd be *very* interested in this. Most of my transactions are done online but the idea of a card-swiper in my pocket is really compelling.

Jay Jennings

[artistjoh]

Ditto to Jay Jennings.

The average person has little need for a card swiper but I own a small business and this would be brilliant. Compared to costs involved in alternative card swipers this will likely be very cost effective depending on how they structure fees.
The number of small businesses in existence is huge (how many shops and businesses are in your city?). There is a big market for this. Besides you forget that the device distribution is the smaller part of this scheme. It is the transactions themselves which are the ultimate product being sold and every device will hopefully make a huge number of those with a percentage being taken on every one.

BTW the article does describe the device as a "small-business-oriented project". The only way the masses are involved is that they will be making payments to businesses as before, but this device promises to simplify the process for the business and presumably lower costs. This is all part of the bigger process in which digital technology leads to reductions in prices for consumers. In the long run everyone wins with these sort of innovations.

[beanspell]

OK, this seems like a great idea and granted I don't know the details about how it works but it has to be a security nightmare. I will be leery of letting anyone (a waiter) leave my sight with my credit card once this hits the market.

[JeffDS3]

I am sure that you have to provide certain info to Square before you can open an account. It probably isn't like paypal where all you need is a email address. Plus if you are diligent about checking your back account info daily you can easily spot a false charge and report it.

[windsor2200]

With this gadget the waiter can swipe your card at your table, instead of taking it to another location where there is more chance of hanky panky.

[beanspell]

All points taken but we all know that a HW device can be used by many different pieces of software.... And it isn't the waiter coming to my table and swiping my card that concerns me (I actually think this adds a level of security) it is the dishonest waiter that swipes my card into his personal iPhone/iPod between the table and the register. In theory your credit card number could be out and being used before you leave the restaurant. And I agree we do have the ability to check our cards frequently but challenging charges is a hassle I don't want to mess with.

[studiodave56]

That dishonest waiter has a better chance of not getting caught just by writing down your card number than he does using a reader that is tied to his, phone, bank account and the exact location of the charge.

[Seaspray0]

@windsor2000. Excellent point!

[JeffDS3]

With iPhones becoming more and more common and also a very easy platform to work on I am not surprised to see something like this. There already is a glucometer in the works, now this. I am sure we will see more stuff like this soon. All someone has to do is create a interface for their device to connect to the iPhone and write the software and they are go.

[MMcCubbing]

Will this work with the credit/debit cards that utilize a security chip as a replacement to the magnetic strip?

[dbreunig]

How San Francisco: the demo screenshot is buying $200 raw-denim jeans from a boutique in the Mission.

[EvanSei]

will I get this no I pay for everything in cash (as much as possible anyways) but this is a cool concept and I hope it works out

[atish505]

What is the business use for it? Why would any store owner (who has already invested in and has credit card swipe machine and reader) use this way that sounds crude at best?

If on the other hand the iPhone, the iPod, and Blackberries, Android mobiles etc can be turned into payment terminals that allow you to authenticate and pay at the check out counter it will be cool.

This is one of those products that sound cool and sleek but fails to solve any concrete business problem and is destined for the dust bin.

[PT689]

What if you don't have a store or base of operations (electricians, taxi drivers etc.)?

I think there will be a market for a product like this, especially for one-man-band or smaller businesses, but suspect it's level of success will come down to the fees being charged.

[Bayoustuff]

I agree with PT689. There is a tremendous need for this type of feature. Any business that is operated remotely without a brick & mortar location. Contractors... Plumbers, Electricians, Painters... etc. Sales people who sell at their customer's site. They can seal the deal with a quick swipe. We are currently looking at wireless credit card system for my husband who is an on-site massage therapist. When he is doing corporate chair massage at their facility, this would be GREAT to have. Believe me, this idea would not be destined for the dust bin!! ;-)

[cchanote]

Currently, there are many portable credit card swipes that connected in real time thru wireless data network.
In fact, most ATM machines are now connected to their back-end using wireless network.
In Thailand, there is this sim card payment and mobile payment that linked to wireless provider and banks, so end user can make a payment thru phone (sim card toolkit) then seller can verify the payment using their phone.
I think the Bill Gate's Electronic wallet is slowly coming alive.

[Tallredeye]

What if Apple rejects the app?

[cnetjasonpratt]

Looks slicker than the device Apple uses in its own stores! But they won't every buy a piece of beige plastic. Needs to be either white or black.

[jypeterson]

This would work very well for the healthcare industry -- if the software could be customized to work with HealthPay24. Imagine bedside registration and payment all in an iPhone or iPod Touch...

Amazing!

[jypeterson]

One more note: this solution would be far less expensive than the current system of purchasing or renting card POS systems, which can run anywhere from $800 - $3000. If the brick is less than $50, plus the cost of an iPod Touch, that means a CC POS could be made available for less than $250.

[jypeterson]

Boy, I'm excited about this, can anyone tell?

Think if the Red Laser technology was added to this and it could read the retailer's barcode database...This would be the killer app for the retail industry. No more cash registers, no more CC POS, no more security issues with cash thefts, et cetera.

[seanriceaz]

There are serious security issues with this... It puts the ability to read credit cards into the hands of the masses. It would be fairly trivial to harvest credit cards/passwords etc this way.

On the other hand, if they created a customer-side version of the app to verify/authenticate the purchase on the customer's own mobile device that would be quite a trick indeed! Actually, one wouldn't even need a physical credit card swipe or hardware addon for this to work... Though both parties would need to be able to use the app on their own devices somehow.

[sundayslacker]

I could use this for my new magazine sunday slacker. I deal with small businesses that would love to pay via credit card.

[micjchapman]

I personally can't wait for this. I run a small business where I don't have a brick and mortar store. I sell only online and at trade shows, arts & crafts fairs and farmers markets. I have iphone apps that connect to my authorize.net account where I can manually take credit card info but this will make it so much quicker and easier to check out customers who wish to use credit.

I don't think this will open it up to the masses as some are saying.. People will still need merchant accounts which means they must have legit businesses to qualify for a merchant account in the first place.