Totally useless for Chip 'n' Pin
Because it swipes the magnetic stripe the tech is totally useless anywhere that Chip n Pin is the standard ... the business model is therefore stalled.
Square is now in the Apple stores, both physical and virtual, putting the banking revolution in a plastic cube in front of a lot more eyes than its competitors. For only $10 anyone can drop into an Apple store, pick up a Square box to plug into an iPhone, download the free app and start taking credit card payments. As long as …
...seeing as I think only 2 US banks have started implementing any kind of chip and pin rollout (albeit on a limited scale). Seeing as the the service is limited to the US, this part of the business model is fairly sound as long as chip and pin is not the de facto standard.
The core of the model is suspect though - I very much doubt that they will get the numbers they need to make this operation lucrative.
European card payments cannot use magnetic stripe data anymore. Terminals can fall back to magswipe (mainly to support the cards issued by US banks who are shamefully dragging their heels on chip+pin), but only if the chip read fails. If you do too many swipes on cards that have chips, you'll get a call from your card processor.
As for the "take payments on iPhone" bit, there are many applications that allow you to do "Card Not Present" (CNP) type transactions using a mobile. Tap the primary account number, expiry and 3-digit CVV into your application and it gets sent to the card processor. If you must have it on an iPhone, Irish company WorldNet TPS do an iPhone app here: http://www.worldnettps.com/feature-tour/iphone-virtual-terminal ... but to be honest, any other card processor that provides a webpage for CNP transactions (and that's most of them these days) will be usable on a mobile browser.
As for Square, I'm astounded at how so little can cost so much to develop. I have worked with magswipe acquisition - it's simple, simple stuff. The reader modules are commodity components, the software is a piece of piss to write (even allowing for Square's additional "difficulty" of demodulating the serial data back off the mic input), and once you've got the track data, you've a choice of payment processors all vying for your business.
One good thing: Square's small-time operator demographic looks to be ideal for card-fraud, so it may be the thing that finally gets the US banks out of the 1960s and onto chip+pin. Then we could all remove magstrips and not have to worry about having our cards skimmed.
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