For the first time, your bank can talk to your smartphone through your wallet.
A new service called Square bridges the gap between the physical wallet and the digital smartphone by allowing users to swipe their credit or debit cards with their smartphones and pay for virtually anything.
The service is the brainchild of Twitter co-founder Jack Dorsey, and works like so:
The idea is to make credit card sales easier for folks who don't necessarily have stores.
For example, if I wanted to sell my couch before I moved to a new apartment, I could accept a credit card payment via square -- no credit card machine necessary.
Here's a video explanation of the service:
Like a real business, users have to pay a cut of profits, too -- but Square says it's far less.
Here's the breakdown:
Square settles transactions with merchants each night, and merchants have access to an online dashboard with analytics.
Approximately 1,000 users are currently using the service in a pilot program, including some high profile folks, including alt-rockers Spoon, charity Tipping Point and New York Democratic congressional candidate Reshma Saujani.
As you might have guessed, it's a brilliant way to raise small amounts of money going door-to-door. (Howard Dean must be thrilled.)
In a profile of the service, FastCompany says Square is "bringing the card swiping process into the mobile phone era." Innovative as it is, it's really just a way to compensate for peoples' resistance to moving their financial transactions entirely digital.
After all, debit and credit cards are just physical manifestations of a digital bank account, right?
No matter. It's the right tech at the right time. (To prove that, the project has received funding by Khosla Ventures.)
The question is whether Square can help foster widespread adoption of credit card payment. It's widely known that most small businesses won't accept credit cards (or require a minimum payment, a violation of their merchant's agreement) because they get gouged on fees.
But that shouldn't be a barrier to digitizing our financial infrastructure on the front end.
Square's hoping to rub salve on that wound using transparency and simplicity in fees.
As you might expect, the service also has security measures in place. Unauthorized use will trigger a notification sent to the impersonated; moreover, merchants can associate a photo with the account as an extra layer.
Square says it doesn't keep your credit card number on file, and your e-mail or phone number isn't shared with the merchant, just Square. Credit card data is encrypted.
One more thing: the service also encourages repeat customers by offering incentives -- yes, just like your "show 10 stamps and receive a free coffee" card from the local cafe.
Square isn't the first service to enter the mobile arena -- consider Obopay, Swipely and GoPayment -- but it might just be the most simple.
Do you think you'll be hip to be Square?
This post was originally published on Smartplanet.com