Monday, April 2, 2012

Square Allows A Larger Array Of Retailers To Accept Payment Cards


The last time I went to my barber to get my son's hair cut I had to step away to get cash.   The barber informed me that he could now accept credit cards.

I was not sure of the method by which he would process the card so I opted to run out to the ATM for cash.

Upon my subsequent visit to the barbershop I noticed the "We Accept Credit Cards" sticker on his mirror along with the "Square" logo. 

He had purchased the Square service and the little magnetic card reader that plugs into his iPhone.

This innovation should exponentially increase the number of retailers/service providers that can offer payment card options to their customers.

Previously a merchant would need to go to their bank and apply for a "merchant id" and go through an extensive credit-worthiness check before being allowed to accept credit cards en masse.

It appears that Square merely extends the "person to person" payment system that we know from "Paypal", further into the commercial space.  

While this expanded window for merchants (easier establishment of an account) poses a greater risk for fraud I believe that it will be balanced out by the great increase in transactions to debt cards instead of cash.

Let's hope that Square has a sufficiently higher level of scrutiny placed upon exceptional transactions (suspiciously large or suspiciously frequent) and is more aggressive in shutting down rogue "merchants" than a bank with a more formal establishment with their merchant customer needs to be.

I believe that this is a net positive - as long as people use Debit instead of Credit.

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