-
Square is expanding beyond mobile card acceptance with a new service that allows consumers to initiate payments through a mobile app.
May 23 -
Visa says its size will help it succeed in launching its own digital wallet, a market where many established payment companies have learned that bigger isn't always better.
May 11 -
A host of new mobile payment applications promise many of the perks of near-field communication technology, without the costly hardware.
May 2 -
Visa Inc. has invested an undisclosed amount of money in Square Inc., the start-up company that lets merchants accept card payments through a small square-shaped device that plugs into smartphones.
April 27 -
Square Inc. is making its smartphone magnetic stripe card reader available through Apple Inc.'s retail stores and website, but its rivals got there first.
April 25
Square Inc. is coming out of its corner swinging.
Not content to compete just against terminal makers, the San Francisco company will challenge established players in the mobile payments field when it allows consumers to initiate transactions at the point of sale without a card.
Square's system is limited in that it works only with the subset of merchants who are comfortable using a mobile phone or iPad in place of a cash register. But experts say Square's marketing prowess, well-financed backers and steadily growing base of retailers could give PayPal Inc. and other big contenders a run for their money.
PayPal and Square have "certainly discovered that the formula for pushing out new payment methods is through the merchants," by filling their need for cheaper services, said Avivah Litan, a vice president and distinguished analyst with the research firm Gartner Inc. "It's the payment accepters that drive new payment types, and PayPal figured that out many years ago. Square has figured it out for the physical space. They still have a long way to go but the formula is right."
By contrast, many mobile payment systems banks favor require special hardware.
Square's new service, called Card Case, stores users' payment details for future access from a mobile device after users swipe their card at a Square merchant once. It currently works only at merchants that use a new Square card processing application, Square Register, for Apple Inc.'s iPad. Just 50 merchants use the Register app today.
Anuj Nayar, a spokesman for PayPal, declined to comment on Square's service but reiterated PayPal's plans to expand its mobile services to physical merchants.
"We will be trial-ing [at the] point of sale by the end of the year," Nayar said, declining to discuss details of PayPal's plans. PayPal, a unit of eBay Inc., in April announced it had acquired a startup called Fig Card with a similar service.
Though Fig and Card Case aim to improve the experience for consumers by cutting out the plastic card, experts say these and other "digital wallet" apps in many ways are trying to improve a process that really isn't broken.
"In this whole space I think what folks have lost a little sight of, frankly, is making a payment in the United States or Canada in the offline world is not that difficult," Brad Strothkamp, a principal analyst at Forrester Research Inc., said.
Regardless, major payment networks, wireless carriers, payment terminal makers and a slew of software developers are investing a lot of money in trying to bring mobile payments to the physical point of sale.
The payments industry has largely bet on a technology called near-field communication for contactless payments made from chips built into mobile phones. Such systems face big barriers, such as convincing merchants to invest in new hardware and getting consumers to buy NFC-equipped phones.
Companies like Square have chosen to instead offer services that work mostly with existing hardware. Consumers enroll with Card Case by first making a card payment to a merchant that uses Square Register. Consumers then receive a text message invitation to install Square's app on their smartphone. The app also asks a consumer to upload their photo, which can be displayed to the merchant during a transaction for authentication. For large transactions, the Card Case feature also requires a customer to input a PIN.
"There's a lot of moving parts … that have to come together for that but I still like it better than NFC because I always like things that work with software better than things that require hardware," Aaron McPherson, a practice director with IDC Financial Insights in Framingham, Mass., said.
Sam Penix, the owner of Everyman Espresso coffee shop in New York, is one of the 50 merchants who joined Square in its launch of the Register service. Until Penix began using it two weeks ago, Everyman Espresso did not accept card payments.
Penix said he sees value in the Card Case for "places like me where we have a huge percentage of our business that relies on regulars … figuring out how to speed up their transaction process is always something I'm thinking about, so I think it's kind of cool for that reason," Penix said.
The Card Case feature is currently available for iPhone and will later be available for devices running Google Inc.'s Android software.
Nayar said PayPal's planned services further improve on the mobile payment processes deployed today.
"Right now we think people are missing a major point of getting into the physical point of sale," Nayar said. "It has to be better and easier than the current system."
Nayar added that PayPal's service "will look significantly different from what we're currently seeing out in the market."
Think Computer Corp. has rolled out a mobile payments service called FaceCash to about 20 merchants in the Bay Area that allows consumers to load funds into a mobile account. Consumers use the account to make purchases at FaceCash merchants, which can verify a customer's identify by seeing a photo of the customer that appears when they scan a barcode at the point of sale.
Aaron Greenspan, the president and chief executive of Think Computer, said it is trying to expand use by working with terminal makers to integrate its software into their existing hardware.
Greenspan said FaceCash would be attractive to both traditional retailers that already accept card payments as well as smaller merchants that do not accept cards, the market that Square has focused on most. However, he acknowledged marketing has been a challenge.
"There's no question that's an issue," Greenspan said. "In terms of solving the problem, I don't have a magic solution," he said, adding that Think Computer will likely work with larger partners as it further develops its service.
