Square's Disruptive Payment Service About to Get A Huge Retail Boost from Apple | Hacker News Reader

Square's Disruptive Payment Service About to Get A Huge Retail Boost from Apple

techcrunch.com

162 pointsJsarokin70 comments

As a former retail manager of a brick and mortar store, I have to say that anything that brings competition to the payment processing industry would be huge for retailers.

Obviously, a retailer of Apple's scale has that much more to gain from disrupting the industry. Even moreso if they plan on having to negotiate with payment processors when they bring an NFC solution to market.

Apple isn't bringing an NFC solution to market anytime soon to the best of my knowledge.

Sadly, Square doesn't actually bring any competition to the payments marketplace at all. It just further entrenches credit cards.

I've written more about this here:

http://www.quora.com/Aaron-Greenspan/Paying-With-Your-Phone-...

I don't think that's a fair assessment . Square is coming from the merchant acquiring side (traditionally strict B2B), and branding themselves to consumers at the same time (theoretically, to breed trust). Square manages risk, don't get distracted by the hardware.

Well, maybe they bring some kind of competition in the world of merchant acquirers, but they are raising interchange prices, not lowering them. True competition lowers prices.

Have you looked at the mess that is FirstData> ISO> ISO> ISO?

Sales has been difficult to scale in this market for so long, it has relied on lots of layers of independent sales people. I would argue Square will bring some efficiency to this market.

I have. They don't seem to have changed much since they launched in 2009.

I'm not sure you took my point. FirstData is the largest merchant acquirer in the country; it's now privately owned, bought for $30B. It used to be part of American Express, as an interesting sidenote. These are entrenched industries, and you can't simply change them over night.

Out of curiosity, have you worked for a +$10B business?

I guess I still don't get your point. What is it?

Also, no, I haven't worked as an employee for a $10 billion company, nor do I have any desire to.

And yes, you can change entrenched industries overnight; that's the point of technology entrepreneurship, and it's why many of the people who frequent Hacker News bother coming at all.

Lastly, I've noted that in other parts of this conversation you claim to be an expert on payments--so who are you, again?

Square is the only card-present service I am aware of that offers a free swiper, no application process, no setup fee, no monthly fees and a reasonable transaction fee. That is clearly competition.

It's suicidal to enter the game with an alternative. You have to build a chunk of business and then you can think about something more alternative. Jack and Keith clearly understand this.

Overall, I like it and it's a great idea. But...

Have you ever been a merchant accepting credit cards? So, that guy buys your couch for $300 (in the promo video) and guess what, no $ gets deposited into your bank account. In the merchant world, that's called a chargeback. 99.9% of the consumers have no idea what this means...you don't get paid and it typically costs you additional fees.

Merchant clearing companies ONLY provide an authorization and a money transfer service for their vig. This means, consumers (and businesses) have nobody working for them and no protection against the deadbeat or scammer.

So, you can buy that 108" LCD TV on your AMEX, have it delivered to a friend's house, call the merchant back and claim you didn't receive it, and the merchant will get the chargeback since they can't prove you signed for it. Really.

The rules for chargebacks are better for card-present transactions. According to their site, if you get a signature and "verify the signature matches, you will usually win the chargeback dispute":

https://support.squareup.com/entries/160990-security-and-com...

Although I hav no knowledge on the matter, why is there an assumption that this means the iPhone 5 won't have NFC? I'd imagine if Apple were to introduce NFC it would do so by bringing on board a few large retailers who would support it and get key recognition at the iPhone 5 event. Square would still serve a role with smaller businesses and for person to person transactions for a while I'd imagine, on top of which one would assume that square would eventually rely on NFC as well and drop the attachment. Or maybe Apple would buy them outright - hence the reason to establish this relationship now.

More people have credit/debit cards than smart phones. There is no reason why Square couldn't support NFC eventually, but I think for the next decade, retail purchasing experiences, will involve consumers with credit/debit cards.

How does a retailer using Square manage PCI compliance?

Are retailers using Square automatically non-compliant? My understanding is that PCI Council has not approved mobile applications under PA-DSS, and merchants who accept card using software that is not PA-DSS are automatically non compliant on PCI-DSS.

I think this is really smart. Think how insane garage sales can be now when people can accept credit card payments. Or being able to split checks at a restaurant (when the waiter/waitress wont do it) by charging the others at the table while you pay the restaurant. Sure it looks like Square is losing money on this, but I think it was on HN where I read that Square was already processing $1mil a day. I'd also assume that this $10 credit won't be around forever.

Either way, the simplicity of Square is what will make consumers interested.

Why would you want to pay the credit card companies to split a bill at a restaurant when you can split it for free with other solutions?

This is something my startup has been working on (among other problems in payments):

https://www.facecash.com/video/index.html?video=2

video does not explain how exactly payment split would occur. My understanding is, its easy to calculate how much each person owns, but thats easy part. hard part is to split the bill on n credit cards...

We don't use credit cards. The primary payer records the split and everyone else sends a free peer-to-peer transfer. It can be done through the app or the web.

People don't want to be charged a fee to make a face-to-face transaction with someone they know. That is a lousy business.

Because the convenience is worth the minimal fee? If I'm already paying $30 for dinner, the extra 82 cents doesn't really bother me.

I just came back from eating, and two people used paypal over their phones to pay each other to split a meal... doesn't seem like carrying an extra gadget around is as good as the "what's your paypal" method.

Well I mean it was just an example. But I'm sure that people are more likely to have credit cards than PayPal accounts. I personally am not a fan of it.

What I did was epoxied the Square reader onto a keyring. That way I don't need to think about remembering it.

I don't know how it works, but for infrequent situations like this couldn't you just use the Square service by typing in the card number?

FTA: "it appears that Square could be losing money on this"

What a naive statement. The author was doing some good reporting, then says something like this? Obviously selling the hardware is not Square's business model; collecting transaction fees is. Basic economics says they would want the devices in as many hands as possible.

I imagine Square would want the devices in as many hands as possible that actually accept credit card payments. If Apple retail stores were to simply give away the devices, there'd be a lot of people picking them up, with little advantage to Square. People like free stuff, even if they don't know what to do with it. By selling the product for $10, customers will think it is at least worth $10.

On Square's website, it's fine to give the devices away, because many of those visitors are already interested in accepting credit card payments. Not all Apple retail store customers are. On every Square sale that Apple does, Square is probably out $5 or more, but it's worth it, because it weeds out the least serious customers.

Is Square attempting to market consumer uses for their product? It seems like a device and service to process credit-card payments isn't really right for the masses of consumers that flood through Apple stores.

The liquor store down the street just got a 27" imac for their POS, and the hydro store two blocks down has the same POS. Small business owners are notoriously incapable of understanding tech.

First, yes, Square is going after what you might call a "consumer". Second, Apple counts millions of small businesses among its customer base.

Count me in as one of the people using Square as a consumer device.

Ever been out to dinner with friends and when you go to split up the check, everyone wants to trump because they don't have cash and only have a credit card? Boom. Now I'll just trump and then have everyone pay me back with Square. The convenience is worth the inexpensive transaction fee.

Wow.

Awesome, Rube Goldberg.

I can't wait to be hassled by the first homeless person who's sign advertises that they can securely process credit card transactions!

Relevant:

http://www.youtube.com/watch?v=5tvuDxM7mdE

I think this increases the possibility of something like Square being built into the next iDevice with Apple buying Square first. If Square doesn't sell, then expect Jobs to build his own.

Build his own credit card reader into the iPhone?

Can't wait to start buying street drugs with a credit card.

My project (which was rejected this YC round but I still think is promising) will benefit from widespread square adoption so this is cool.

BTW is anyone from Square here on HN?

I'm an engineer at Square. I'm sure most of the company is on here as well.

What is your project?

It's a great idea with a great team behind it and this is a huge win on the biz dev side. Congrats to the guys.

One inconsistency from the TC post though:

> ... announcing that it is processing $1 million in payments per day

> COO Keith Rabois told us in January that the startup is expected to process $40 million in transactions in Q1 of 2011 ...

There are more than 40 days in Q1, even if you limit it just to business days. I'm confused.

It sounds like to me that they expect to process in total 40 million during Q1, but they could process up to 1 million in a single day? Clarification would be nice in the article .

The reason the projection for Q1 was only 40M is because it wasn't until March that Square reached the 1M/day milestone (http://techcrunch.com/2011/03/02/square-now-processing-1-mil...).

So in January and February they were doing less than 1M per day.

Although, I was initially skeptical of Square's success, I have found Square to be great for splitting small charges such as a dinner or a gas bill between my friends and I. The little card reader gizmo is a great conversation starter.

What does the dongle thingy feel like when youre using it? I've never seen one IRL, but all I can think about when I see the photos is that it would spin around, be awkward to use, and maybe even wear out the headphone jack. Any comments from your experience are appreciated.

It feels a little flimsy and does sin around in the headphone jack, however, it's a neat little dongle and I have yet to have any problems reading cards. I generally keep the dongle in my bag so that I have easy access to it when I need it.

It doesnt matter. I want more things to carry in pocket to feel cool and call it disruptive.

Square users only keep the device into their phones when they are taking a payment. When it is not needed they will carry it in their pocket, backpack, purse, or even put it on their keychains.

Even if someone were to keep the device in their phone all the time I do not think it would wear out their headphone jack. It is no different than keeping headphones plugged in all the time.

It does feel a little flimsy and it takes a few tries to get the hang of it reliably. At some point square will need to provide more heavy-duty readers for higher volume merchants.

I epoxied a keyring onto my Square device so that I can keep it on a keychain. Having anticipated the spinning thing, I have the keyring hanging off the same side as the headphone jack. That way, when I have it hooked up to my iPhone, it acts as a brace and doesn't spin at all. It wiggles slightly, but no spinning.

cool. do you eat the square service charge for these transactions, split it, or pass it all on?

I use Square for the same things. I usually just eat the fee. The rate is so low (2.75%), that the fee doesn't even hit $1 until you're charging over $36. And if we're spending that much, I'm not gonna quibble over what's essentially change.

I keep wondering. How can you trust the app on the iPhone you are swiping your creditcard through? Isn't this just a skimmers dream come true? Also, in Europe the magnetic strip is quickly being replaced by a chip.

Is the black model new? I hadn't seen that one before.

You can also purchase the device in black or white (previously the Square devices were only sold in White).

How this could/would affect Apple's adoption of NFC?

Apple's adoption of NFC is focused on using the iPhone to make make payments. It would be interesting to see if they are planning to use it also to transfer money from iPhone to iPhone.

To me, it suggests that the iPhone 5 will unfortunately NOT have NFC (or at least not the built-in iPhone-to-iPhone payment system many of us expected).

This is a real shame, as the fragmentation of Android means it will be hard for Google (instead of Apple, as expected) to truly make NFC the new "digital wallet" standard.

There are a ton more stakeholders in NFC technology than Apple and Google. The way Mastercard and Visa look at it, they are taking away market share from cash ($).

Currently, contactless payment terminals exist at 1% of merchants (the 1% is from memory, but it is low): -Fast food (e.g. Mcdonalds, Jack in the Box) -Convenience (e.g. 7-eleven) -Movie Theaters (e.g Regal Theaters) -transit terminals (e.g. Las vegas, San Fran, Chicago, D.C.)

These two companies are not the make or break stakeholders in the NFC equation.

Personally, I think that it could complement NFC. It reinforces the idea that your iPhone is the new way to 'do business.' NFC would enable person-to-person or person-to-merchant transfers. This would also enable person-to-merchant transfers although, only the merchant needs an iPhone.

Am I the only one that feels that this will impede the adoption of NFC-style payments?

I watched a documentary showing how hackers can get your CC number (and basic info I think) simply by using an NFC enabled device and standing next to someone with such credit card. I think the Square method is safer, for now.

You watched a documentary?

I come to HN for expertise because there are so many knowledgeable people that know a great deal about things in which I'm interested, but am only a beginner. I've come to expect expertise on this site in almost any category. As such, my only expertise is payment processing and mag stripe/ smart card/ contactless (NFC), both the technology and the business.

In short, your documentary was incorrect, and considering the technical nature of this site, this topic needs more color.

NFC is a very low-level protocol, security is determined by the overlaying pieces. Two of the most prominent security implementations (FeliCa by Sony, and MiFare by NXP semi) operate by "security by obscurity." The contactless national passports support FIPS 140 security (based on PKI). This is the best security you can get, As long as the developer has access to the secure element on the device, it should be straightforward how to implement good security. Think of it as SSL, but the issue is doing it well with a data rate so low (424kbps, typically, with 848kbps at most).

NFC technology has been at a stand still for 3+ years because everyone is fighting over who has control. The carriers aren't going to sell phones with their secure NFC elements "open." The carriers will extract some revenue from phone payment transaction unless someone makes a nice NFC "phone sled."

It is possible to be an expert on payment processing without being rude and obnoxious.

If you don't like what you find on this or any other web site, no one is forcing you to visit.

Maybe I'm old, but 424kbps does not seem like a low data rate, particularly for a passively powered RF device.

And your expertise gives you the confidence to make a statement about the fallacy of a documentary you haven't watched? I can only say "Ok".

Edit: Here is what someone who watched it and is "also" an industry expert like you has to say http://abcnews.go.com/2020/story?id=2129328&page=1

You're probably not the only who feels that way but it's as likely that this could speed it up. NFC is just a fancy way to communicate a number which is the easiest part of a credit card transaction. Square will be well-positioned to serve the long tail when/if NFC gains traction.

Here's the next step in this relationship:

http://twitter.com/stevecheney/status/43042602668404736

Dorsey wouldn't sell.

Please be respectful of all HN users time and don't link to your own Twitter statuses. This could be written as a comment on HN.

the point of the status was that this was written 6 weeks ago. Predicting a deeper apple/square relationship was right on

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