Don’t you just hate it when you try pay for something and they don’t take credit cards? I mean, who carries cash these days? Well, now even those small corner stores will be getting rid of their “Cash Only” signs and catching up to the plastic age. A mobile credit card reader that allows anyone with a smart phone or iPad to accept credit card payments is now available at Wal-Mart. Not only do the readers make life easier for those of us who keep forgetting to hit the ATM, small businesses for which high costs have put traditional credit card readers out of reach can now charge their customers like the big boys.
The makers of the card reader, mobile payments venture Square, had already made them available at Target, RadioShack, Best Buy, and Apple stores. But the ubiquity of Wal-Mart stores means the Square readers could quickly change the way small businesses do business. The card readers’ popularity is growing faster than credit card debt. Just this summer, Square was available at only 200 retail locations. Today, the system can be bought at 9,000 locations across the US. Getting the Squares into as many small business hands as possible is obviously a priority. They cost a mere $9.99 each, and business owners can even get them free by signing up on the Square website. And even if they pay for the readers up front they get reimbursed when they eventually sign up on the site. Right now they’ve already found their way into the hands of many a business owner – transactions with Square are currently at $11 million per day, $2 billion per year.
The actual reader is a small square that plugs into the headphone jack of your iPad, iPhone, or Android. Credit cards are slid through and is processed by an app that Square provides. It accepts payments with Visa, MasterCard, American Express and Discover cards. At a time when people are increasingly reaching for plastic instead of cash, small businesses that can’t afford the high upfront costs and monthly fees of traditional credit card readers have been at a disadvantage. With Square the only cost to business owners is a 2.75 percent transaction fee, the rest goes straight into their banking account. In fact, from what I can tell you don’t even need to have a business to use Square. All you need is an email address to register, then, when your friend forgets to bring cash to the poker game (again!) you can say, “No problem. I accept Visa.” Except you’ll want to charge him the 2.75 percent transaction charge for his added convenience.
Square is the brainchild of Twitter creator Jack Dorsey who obviously buys in to the recent trend toward mobile payments. Square is his effort to stay ahead of the competition while the industry is still young, and investors are making sure they come along for the ride. Created in 2009, the company raised $100 million in financing this past June, increasing Square’s total venture capital investment to $140 million and company value to $1 billion.
What exactly is the trend that’s got Dorsey and investors licking their lips? A global mobile payment market that reached an estimated $69 billion in 2009, and is expected to reach $633 billion by 2014. It is also expected that by 2014, 490 million people will be using their smart phones to pay for products and manage their money. This past January Starbucks made it possible for customers to pay for their caramel machiatos with Starbucks cards pre-loaded onto their smart phones that cashiers can scan directly. Before you know it, cash is going to start looking like those bulky cell phones from the nineties, the ones you used to pull the plastic antenna out with your teeth.
But to be the king of this money mountain Square is going to have to fight through some stiff competition. PayPal, currently the leader in mobile payments processing, wants to keep it that way. In 2009 the company processed $141 million in mobile payments. In 2010, that amount jumped 500 percent to $700 million. “We are already the leader in mobile payments,” senior director ob PayPal Mobile, Laura Chambers, told CNN Money in an article this past January. “We’re going to continue to innovate, and we’re getting very aggressive about mobile payments in the next two years.”
That timeline seems about right for a company who’s founder predicted that, by 2015, “we will no longer need to carry a wallet.”
The “we” Mr. Scott Thompson is referring to is undoubtedly people like himself with laptops and smart phones, and who do their Christmas shopping on eBay using their PayPal accounts. For much of the US and the world where the nearest Starbucks is hours away, it’ll most likely be a lot longer before digital money becomes more convenient than good ol’ fashion cash. Come to think of it, I bet many of those people don’t even have Twitter accounts.
I’m sure that doesn’t matter to Dorsey, who runs the two companies by logically spending eight hours per day at each (he takes the weekends off). Small business owners, many of whom I’m sure put the same amount of time into a single venture, will get the Square so that they can get a greater return for their efforts. Then maybe they can take the weekends off too.