by Luke Jones
Posted 1/14/2013 12:00 am
Another harbinger of the doom of cash comes from smartphone-mounted credit card scanners, a relatively recent technology making it cheaper and easier for vendors to accept plastic payment.
There’s a growing market for the technology, and a number of companies have jumped in with their own products, ranging from the tiny Square to the phone-swallowing Payware Mobile.
Square is the most recognizable device on the market, especially after the company’s August team-up with Starbucks. Square Inc. claims about $10 billion in payments are already processed per year through its services.
Its appearance is exactly as the name implies: A plastic square, rounded at the edges, about the size of a quarter. A slot in the top is just deep enough to admit a credit or debit card.
The device jacks into a smartphone’s headphone port. After swiping, customers can sign their names on the phone’s touch screen, and a receipt can be texted to them shortly after the sale. Retailers can also use the app for inventory and rewards programs.
Square estimates that two-thirds of the country’s small businesses don’t accept plastic, so that’s its target market. Traditional card readers can be big hassles for startups, a fact that Andrea Sanders, owner of food vendor Sweet Soul in Little Rock’s River Market, remembers well from her previous business.
“A lot of times those machines would wear out,” she said. “A new one would cost $200 to $300; then you’d have to get the paper to go with it.”
Repairs would have to go through a middleman, she said, and bank fees squeezed her profits. Not only that, but a traditional reader usually ties up a phone line and requires a constant power supply.
When she found out about Square’s services, she switched immediately. Both the device and the app are free — a replacement device is about $10 — and sellers have a choice of two payment plans. They can shave off 2.75 percent of each sale or pay a flat monthly fee of $275, a better deal for businesses that can count on card-swiping more than $10,000 a month. Sanders said she had chosen the former, at least until her restaurant builds steam.
Since starting, Sanders said, Square has helped her business. Money comes in faster, she noted. With a traditional reader, she said, if the card was swiped on a Thursday, “they would hold the money until Tuesday or Monday. With the Square, if it’s swiped Thursday, it’ll come in Friday.”
Many of the River Market shops now use Square, Sanders said. Jay’s Pizza, for example, uses Square Register, which converts an iPad or tablet into a cash register (minus the cash, of course).
In the future, Square may even replace debit cards altogether. With the Square Wallet app, shoppers can use their smartphones to instantly transfer funds to a seller via the Square app. Sanders hasn’t seen any shoppers use it, she said, but she knows how to use it and declares it to be “pretty cool.”
Square’s weaknesses come from some compatibility issues — it’s only available for iPhones and Androids — and the fact that it only works in the United States and Canada. But the presence of competitors on the market seems to indicate that the technology has nowhere to go but up.