Square is making a new consumer push for its “Pay with Square” app, formerly Card Case. It operates very much like PayPal’s new mobile app. There’s no need to swipe a card; the payment is authorized by the consumer on the smartphone and transferred to the merchant’s account, minus processing fees.
The whole system is quite elegant actually.
The company now has three products: the consumer “Pay with Square” payment app, the merchant dongle and an iPad-based POS tool (“Square Register”).
Square is pitching both sides on the payments app; it’s a rewards and loyalty tool. Indeed, Square’s ambitions have moved well beyond simple credit card acceptance into a full-blown CRM system for small merchants. I haven’t seen the roadmap but I’m sure there’s a great deal of interesting stuff in there.
The challenge is to gain consumer adoption of its payments app, as well as rise above the increasing noise in the SMB corner of the mobile payments world.
There are now multiple vendors in the smartphone-dongle-card-reader space: Square, PayPal, Intuit, PayAnywhere, Groupon and most recently Coin. The way newer entrants are marketing themselves generally is by reducing processing and transaction fees — creating a kind of race to the bottom.
(I wouldn’t be at all surprised if Constant Contact bought a payments provider to add to their growing suite of SMB services.)
The genius of these dongle-based card readers is that they don’t require any consumer behavior change and they’re simple for merchants to set up. They’re also potentially quite disruptive to traditional POS vendors — who will ultimately be compelled to buy these companies — as they move up the food chain.
Creating a closed-loop “marketplace,” however, as Square and PayPal are trying to do is more difficult. PayPal has millions of consumer-users but is essentially a me-too product: Microsoft to Square’s Apple. Yet PayPal’s scale and installed base may allow it to capture more share and grow beyond Square.
We’ll see. There’s a bit of a land grab going on now. Those that get to scale or some version of critical mass first will win.
