Home > Business & Strategy, Electronic Funds Transfer (EFT) > Twitter founder squares up to m-payments market

Twitter founder squares up to m-payments market

December 8, 2009 Leave a comment Go to comments

Jack Dorsey’s Square start-up enables anyone to accept credit card payments using their smartphone.

Twitter founder Jack Dorsey’s new start-up, Square, is set to take an unusual approach to the mobile payments sector by enabling anyone with a touchscreen smartphone to accept credit card payments.

It emerged this week that his new company has developed a small plastic device that plugs into a smartphone’s audio jack and is capable of scanning the magnetic strip on a credit card.

The scanner works with a specially-developed application on the handset that allows users to sign an electronic payment slip on the device’s touchscreen using their finger.

The app then wirelessly verifies and transmits the payment to the user’s online Square profile, which is tied to their bank account in a similar way to Paypal.

So far the app is only available for the iPhone and iPod Touch, although Dorsey said in a report by the Los Angeles Times that Square is currently developing software for Google Android, Blackberry, and even PCs.

He said the payment system is currently in the beta test phase, although he plans a more widespread launch in 2010.

“I think we’re going to give the Squares away for free because they’re pretty cheap for us to make” said Dorsey, in the report, who later added that a charge of $1 might be levied on the accompanying application. He also sees Square’s potential in the classified ads market, particularly with online services like Craigslist. “[Craigslist] is doing more transactions than eBay today and has no inherent payment mechanism,” said Dorsey.

By following a similar model to Paypal, Square’s over-the-top service is not predicated on collaboration between network operators and financial institutions. Using Square does not require a near field communications (NFC)-equipped handset either.

Instead at this stage the service is more likely to be driven by consumers, credit card issuers and retailers; that or the venture capital-backed firm will be bought out by a player hoping to grab a slice of the m-payment market.

Either way the launch of Square comes at a time when the mobile industry is trying to encourage the rollout and consumer uptake of mobile financial services.

Mobile banking platform provider Fundamo told Total Telecom in November that it expects the tipping point for mobile financial services in mature markets to come in the next three to five years – driven by banks and mobile handsets.

“This is something we are sure that consumers want; mobile handsets are becoming such an aggregator of services anyway – mobile banking is one more service,” said Aletha Ling, chief business development officer and executive director at Fundamo.

“It will only take one bank to do it, and do it well, for it to be successful,” she added.

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