San Francisco-based Square was founded in February 2009, but it tested its products privately until November 2010, when it finally became available to the general public. Now anyone can sign up on Square’s website and request the Square reader dongle. The reader is free, and is automatically shipped to you after filling out an online form. You can also purchase the reader through the Apple Store online, and there are plans to bring the device to brick-and-mortar Mac Stores in the coming months.
At present, Square supports the iPhone (3G/3GS/4), iPod touch (second-gen and higher), all iPads, and select Android devices, including those from Dell, HTC, LG, and Samsung. The reader involves very little setup effort. Even the instructional card only lists three steps: 1) Plug in the reader, 2) Get paid and 3) Visit Squaredup.com to view reports and receipts. In practice, there’s a bit more to it than that, but not much.
Square requires three things of its users: a U.S. bank account, a physical U.S. address (not a P.O. box), and a Social Security number. Merchants can associate their tax ID number with a Square account, but that’s in addition to, not in place of, the SSN requirement. The only fee Square charges is for transactions. For swiped purchases (where the card is physically swiped through the dongle), the fee is 2.75 percent. For keyed-in transactions, the fee is 3.5 percent plus $0.15.
Square has come under some scrutiny for its security. In May 2010, misfired e-mails errantly informed Square customers that their accounts had been accessed. More recently, the company faced accusations from competitor Verifone, who claimed the card reader’s hardware contains a security flaw. These claims weren’t “fair or accurate,” retorted Dorsey, writing a defense of his company’s security practices on the Square company home page. Dorsey also noted that Square’s partner bank, JPMorgan Chase, stands behind every aspect of the service.
Despite such criticism, Square recently solidified its status as a major player in the mobile payments market when it received an investment from Visa at the end of April. Though neither company has revealed the amount of the investment, the backing of a giant in the credit card industry clearly represents great potential for growth. What’s more, following news of the Visa investment, Square announced that it will be adding on-device encryption to conform with Visa’s standards for mobile applications. (This means that the company will need to redesign its dongle.)