Square has the potential to be a game changer. It allows anyone with an iPhone to accept credit cards. The founders, who previously founded Twitter, realized that while just about everyone has credit cards, only 2% of credit card holders had the ability to accept them. From their site:
Square changes all that. All you have to do is download their app, give them your social security number and a bank account number and you can process credit cards. If you want to get a lower fee, you can request that they send you a free credit card reader, which you plug into your headphone jack. From their site:
In February 2009, Jim McKelvey wasn’t able to sell a piece of his glass art because he couldn’t accept a credit card as payment. Even though a majority of payments has moved to plastic cards, accepting payments from cards is still difficult, requiring long applications, expensive hardware, and an overly complex experience. Square was born a few days later right next to the old San Francisco US Mint.
I’ve downloaded the app and played around with it and it’s about as easy to use as it could possibly be. Just like paypal, you always know what you have to do to accept payments. Imagine being able to settle debts and split bills at restaurants right on your phone. Or maybe accept a utility bill from your roommate who never has cash and doesn’t like to write checks. Or imagine a street vendor selling food or tshirts. Square opens up completely new markets and lowers the friction between buyers and sellers.
There are drawbacks. First, many people do not trust vendors who use their personal mobile phones to accept credit cards. People are worried about being scammed. I wouldn’t be too worried about being scammed, since if you challenge credit card purchases, your credit card company refunds you and goes after the seller. From my understanding you won’t have any liability, but that does not stop the trust factor from being an issue.
The second problem are the credit card fees. Square charges 2.5% when you use the card reader (card present transactions) and 3.5% when you just type in the credit card number. These fees seem really high. I use traditional credit card processors and their fees have been 1.5%-2%. I know that when I sell big ticket items, I shy away from PayPal because the fees eat up any money I make. Square needs to figure out a way to lower it’s fees and get buyers to be more trusting, or find a place where people are willing to pay those fees out of convenience like PayPal did with eBay.
For now, I probably won’t use Square very often, but I can see times I would use it. I’m really interested to see how the general population reacts to Square as it becomes more mainstream. I think it’ll be a tough road, but ultimately, accepting credit cards on a mobile device will be the way of the future, unless we just eliminate the credit card completely and just use our phones to make purchases like they do in Japan.
What do you think? Will Square take off? Will you use it? Are the fees too high?