Developed by a Twitter co-founder, the Square Card Reader is making costly transactions a thing of the past for small businesses in the US.
By Leo Stiles
Starting a business in Ireland is not an easy thing to do, particularly in an economy that could be at best, described as a car crash survivor. Added to this is a scarcity of credit providers and a mountain of red tape and associated costs that can put off many even contemplating a new business venture.
If all this wasn’t enough, there is the emerging trend of cash being used less and less as a means of paying for goods and services and as a result, many small businesses and sole traders are finding that having the means of accepting debit and credit card transactions is essential to maximising their potential customers.
While this is all well and good, merchant services provided by banks have a number of up-front costs and a couple of hidden ones that can easily eat into the revenue that a business might generate by offering their customers the option of paying by card.
Such costs can include a set-up fee of €200 or more, a transaction charge of up to 3.5% and a monthly equipment rental charge. In addition to all this, there are other charges such as bank fees on business accounts and line rental and broadband fees to add to the cost of doing business in this way. Add it all up and for many smaller enterprises, such fees can be a bit too expensive.
Tiny, but powerful
This might be an accepted fact of life for traders and shop owners but a new technology from Twitter founder Jack Dorsey may be about to change things with his latest innovation – the Square Card Reader.
Square is a tiny device the size of a postage stamp which plugs into the earphone jack of any iPhone or Android mobile phone and together with a purpose-built app turns any handset into a mobile cash register.
Once installed, all you have to do is swipe the card through the device to take payment, which is then sent to the bank account or PayPal account you would have provided Square with when you signed up. The only other requirement is that you have an internet connection, which most smartphones have as a default and are considerably cheaper than a traditional business telephone line.
Everything about the service is free, with the obvious exception of a transaction fee which Square have set at 2.75%. This rate is comparable with most other merchant services and even the card reader itself is free of charge and accepts all major credit and debit cards.
Information security, an issue that reared its head in spectacular fashion last week with Sony’s PlayStation Network breach, is up to all legislative standards and is identical to that used in traditional credit card readers that are used daily in high street shops.
So what are the downsides?
For starters, the service is only available in the United States and although Dorsey hopes to expand it globally, the company has yet to announce any expansion plans.
The other issue is one of receipts, which can be emailed to the customer or alternately emailed to a common address for the retailer to print out on the spot. In either case, this means that the service will be more useful to smaller business than those that deal in higher volumes.
The other major stumbling block for a European release is that the current reader isn’t PCI compliant and as most Irish card transactions require the use of a chip and PIN number, the device will have to be revised before it crosses the Atlantic.
Other than this, the Square Card Reader looks to be a potentially revolutionary way for people to get their businesses off the ground and already in the US, Square processed $66 million worth of transactions through the device in the first three months of 2011.
VISA has recognised this potential and this week the credit card company invested $27.7 million in the company to further develop and expand its services. Apple has also listed the card reader in its US store, further cementing Square as one to watch in the future.
While Ireland is unlikely to see Square Card Reader this year, we wager that it won’t be long before start-ups and even car boot sales start using one of these and hopefully it will arrive on Irish shores in time to help entrepreneurs get our economy going again.
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