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Paperless trail: Square can send receipts by e-mail and SMS. Merchants can choose a charity to receive a portion of each transaction fee.

By creating a Square account, payers can obtain extra features, too, Dorsey says. For example, a user can arrange to receive a text message every time his credit card is charged using Square. Or he can upload a picture that will display to the seller whenever the user’s credit card is swiped. “We put a big focus on how to get the payer involved in managing security,” Dorsey says.

Still, some experts are skeptical of Square’s prospects. Jon Paisner, a senior analyst at Yankee Group who studies mobile transactions, says the need to plug in an extra piece of hardware to use Square might prevent people from adopting it. Paisner also worries that the device won’t be sturdy enough in the long-term, and that audio jacks may not stand up to this kind of unintended use.

Paisner thinks there is potential for payments via mobile phones to take off in the United States and United Kingdom, but he thinks near-field wireless communication technology, which would allow users to make payments by tapping a phone against a reader, is more promising.

Mark Beccue, a senior analyst at Abi Research who studies consumer mobile technology, also has reservations. “What puzzles me is, what market we are addressing here?” he says. “I saw a video of using [Square] in a coffee shop and thought, ‘Don’t they have a cash register?’ ” Beccue concedes that the product may work for certain niches, such as markets or art fairs, but he doesn’t think it has mainstream appeal. He suggests that most small businesses will prefer traditional point-of-sale systems for managing credit cards, and that ATMs are convenient enough that individuals aren’t likely to turn to Square to pay each other.

Pilot tests of Square are being conducted in San Francisco, Los Angeles, New York, and St. Louis. Dorsey says the company hopes to open to the public in early 2010.

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Credits: Square

Tagged: Computing, mobile devices, cell phones, financial systems, Square, credit cards, Jack Dorsey, mobile transactions

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