You don’t have to worry about hitting the ATM before your next visit to your favorite “cash only” corner deli. Thanks to Square, a new plug-in device recently launched by Twitter co-founder and company president Jack Dorsey, you can process credit card payments on your iPhone rather than relying on a merchant’s credit card machine.
The idea is simple. The Square plugs into the headphone jack of an iPod or iPhone. The user swipes the card through the slot, the device reads the information stored on the card’s magnetic strip, the customer signs the transaction on the touch screen, the information is sent to a remote wireless router, and voila, the transaction is complete.
Any new credit card technology would automatically raise concerns about identity theft and the accessibility of personal information, but in the case of the Square, no personal information is stored on the device. Once the transaction is complete, a copy of the receipt is sent to the customer via text or email. The gadget was tested by a small group of users for months prior to its official public launch at a European Internet fair in December 2009.
Small Business Friend or Foe?
Small business owners are expected to be among the first to embrace this new technology. It would make the words “Sorry, we don’t accept credit cards” virtually obsolete. It could also come in handy for other business folk who don’t typically carry around credit card machines—namely, vendors at farmers markets, crafters, dog walkers, and baby-sitters.
The product’s launch was met with mixed reviews. Though the device seems apparently easy to use, the security on the back end, specifically the remote server that receives and processes the card information, was a red flag for many industry professionals. There is also a question if the product will be compatible with other cell devices beyond its current iPod and iPhone capabilities. Another potential glitch is that many banks outside of the United States have replaced the magnetic strips on the back of the card with more secure computer chips, so the Square would be virtually useless out of the country unless the technology evolves rapidly to account for the new cards. Also, European businesses have been using wireless card readers for years, so the Square may not be so innovative to some non-U.S. markets.
Patent Pending Issues
However, the larger problem lies with the device’s patent. Jack Dorsey is the recognized developer of the Square, and his team spent most of 2009 prepping for the official product launch. But Bob Worley, a professor of electrical engineering at Washington University in St. Louis, says that he, not Dorsey, came up with the idea for the device, built a prototype for it, and has filed an application for the patent. Worley is a family friend of Square’s co-founder Jim McKelvey, and reportedly shared some of his ideas for such a device. Morley’s came up with the design for the technology that converts the card’s magnetic strip into an audio device. He was reportedly in talks with Square to collaborate on the product, but the talks fell through. Though Morley did file for the patent, it can take up to 18 months for the patent to be granted. In the meantime, Square is free to market their product. Morley is open to negotiating with the company. If not, he may work on a licensing deal with another company. Early figures show that the company is already worth $40 million.
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