NFC chip technology is a market with huge potential for growth as smartphones and other mobile devices begin to replace cash and plastic in consumers’ wallets. In fact, there are some stepping stone applications which are particularly noteworthy in the move toward mobile credit card authorization. One company that can't be overlooked is Squareup.com, or “Square” as it's commonly called. Founded by Twitter co-founder Jack Dorsey, Square is nothing more than a shift away from the traditional use of credit card authorization terminals. Traditionally, credit card merchant services have been set aside for business-only transactions with a hard-wired connection. But what about the guy who runs a taco stand? What about if you want to split the tab on your dinner at Applebee's with a couple of friends? Square has not only helped to solve an immediate pain point, but has also done an excellent job in taking credit card merchant services to a completely untapped market segment: the consumer.
The Square system is simple. You are shipped a free dongle for your smartphone, and then you can install an application wherein you are given the ability to use your cell phone as a merchant terminal. Think for a moment about the power of this type of device. You could easily use your cash back credit card to complete a transaction at a garage sale or accept payment from someone who purchased your couch via a Craigslist advertisement (for a fee of 2.75%). The scenarios are seemingly limitless. With the supposed high ease of use, it leads one to wonder, “isn’t this just another way to make it easier for people to commit credit card fraud?” That is the exact question I asked myself. While this is certainly possible, the company has implemented some interesting security features into the device. Namely, signature and photo authorization and weekly charge limitations (for most users) are included as features of the app. If you are still a skeptic, it may be interesting to note that Visa and Apple have both bought into the technology. In fact, Apple now sells the external phone jack dongle in its Apple stores for $9.95 (but it is no secret that the company’s site gives them away for free). Will this type of technology replace traditional merchants? Probably not, but the next step is certainly NFC chips. Square will be well positioned somewhere in the middle of the eventual fray. Whether they will obtain massive control of the mobile wallet industry remains a mystery. They’ve got a lot of competition and a long way to go before complete integration takes place, but I like the technology. I myself own a Square and have used it a couple of times already. The convenience is astounding. And with a whopping $66 million in completed transactions for Q1 2011, we are definitely seeing a quick adoption of this technology. Where will it go next?
