Amidst Rising Competition, Square Launches

I can’t help but notice the degree to which — from the time I first waxed eloquent about Square, a San Francisco-based mobile payments startup, to today, when the company officially launched — the competitive landscape has changed. Many rivals have emerged with their own hardware that converts the iPhone and iPod touch into a mobile payment terminal. These includes upstarts and an incumbent, VeriFone (s pay).

Just to recap, Square is a small magnetic reader that plugs into the headphone jack of an iPhone, an iPod touch (s aapl) or any Android-based (s goog) phone and allows anyone — from a fruit seller at a farmer’s market to a babysitter — to accept a credit card payment. It was co-founded by Jack Dorsey, the guy who created Twitter, and has raised gobs of money from the likes of Khosla Ventures.

The free Square app can be downloaded from the iTunes app store or from the Android Marketplace. Square charges 2.75 percent of every transaction plus 15 cents. In comparison, other payment systems charge 1.79-4 percent of the sale.

When I wrote about Square in December 2009, the reaction to the company was decidedly divided — people loved the idea or hated it. The comment threads were full of vim and vigor, to say the least.

Nevertheless, what I liked about Square then and still like about it now is the way it’s shaking up our moribund and hidebound payments system here in the U.S. Someday we’ll pay using our cell phones like, say, the Japanese, but as a country we’re not there yet. We like paying with credit cards, and Square is one of the more simpler solutions I’ve seen enabling us to do so.


Here is Square working on an iPad, in a sense giving the traditional Point of Sale Devices a run for its money.

That said, I don’t think Square can get ahead just by offering what it does now: a simple hardware reader. It will need to distinguish itself from a growing number of competitors using software and social networking as a way to stand out.

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