Square might be a first step towards cashlessness

Square, an application that turns a smartphone into a mobile cash register, is open for business.
Created by Twitter co-founder Jack Dorsey, Square uses a free download and plastic card reader to let users accept credit card payments.

[From Mobile-phone cash register Square open for business – CNN.com]

Square has gone through the roof. It’s real innovation wasn’t that you could read the cards with a smartphone (other people make excellent devices for that: Verifone and Intuit for example) but that you didn’t need a merchant account with a bank. You could just sign up and start taking payments. This opened up a whole new market, especially for SMEs, micro enterprises and individuals.

Businesses with many small transactions should look at Square closely, while businesses with high average ticket size should get a competitive merchant account with interchange plus pricing.

[From Should small businesses use Square? | VentureBeat]

Surely this is only part of the comparison though. The school fete cake stand can’t have a merchant acquiring account, whatever their transaction mix. Just trying call your bank and asking them “hey I’ve been asked to run the lemonade stand at the village fair on Saturday and I’d like to accept card payments, can you send over a POS device” to see how far you get. Anyway, customers reveal preferences tell the story.

Square’s Keith Rabois also revealed a number of growth statistics for the company, including that the payments service is now processing $2 billion in payments volume per year. To date, Square has been activated by 800,000 merchants

[From Square Processing $2B In Payments Per Year, Has Signed Up 800K Merchants | TechCrunch]

I was reading a story about Square on the web the other day and I found the comments quite interesting, because they tell you what the consumer users think about it rather than what people like me think about it.

I use my Square reader all the time to get reimbursed for utilities in the house I share with three other guys; the small hit I take for the fees is nothing to get the cash right away (and not have to mess with checks).

[From Square ditches $1,000 per week limits, has 800,000 merchants processing $2 billion per year—Engadget]

It’s these kinds of prosaic applications that have taken Square into all sorts of interesting new areas. In retrospect, it’s easy to see that the demand was there and not met.

On Saturday, I was at the Middle School, manning the snack booth for the regional band competition. I did pretty well – over 50 sales! But what fascinated me was that three people asked, somewhat plaintively, if I took debit cards… They were all young moms.

[From Maybe Cash Really Is Going Away? — Payments Views from Glenbrook Partners]

I may not be in the same demographic, but I’m certainly of the same sentiment. In fact, I’d go a bit further. When I was buying something to eat at one of the stands at Waterloo station the other day, I was positively annoyed when I couldn’t pay for a £4.95 snack by just tapping my contactless credit card but instead had to insert the card, enter the PIN and wait for authorisation. Who has the time?

He said that his entire cab fleet converted to Square at the request of the company’s owner. After four months of use, he loves the device. “It’s a lot quicker and easier,” Mabyae said. He also noted that relative to their old way of accepting credit cards, it seems more secure for passengers.

[From Square, the iPhone Credit Card Machine, Goes Mainstream – Alexis Madrigal – Technology – The Atlantic]

Secure, convenient, affordable and able to pass the most severe of cash replacement tests, the cab driver. That’s pretty impressive! I take my hat off to them, but I would also note at the same time that Square isn’t really that radical. It runs on the existing rails. It makes them better, but it doesn’t make them cheaper or more flexible. There’s an argument that says that the incumbents will only allow in competitors who do not disrupt the existing infrastructure.

Square, a payments company that is a media darling frequently cited as a leading innovator, does not disrupt the financial infrastructure in any way. In fact, Visa just invested in Square directly because it does such a good job of propagating the status quo.

[From In Fifty Days, Payments Innovation Wi… by Aaron Greenspan – Quora]

So Square almost certainly isn’t the end game because there’s plenty more disruption to come. But it is plausible to postulate that Square is a first step into making cash seem inconvenient. insecure and expensive? What if people really didn’t want to take cash unless they absolutely had to? What if using cash became seen as being socially irresponsible, like drunk driving? Well, what if that were true?