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Square Provides Easy Alternative to Cash and Checks

Once is a fluke, twice is coincidence, but three times is a trend. In one recent evening, Square, the service that lets you take credit or debit card payments via a mobile device by swiping the card through a small plastic magnetic-stripe reader, came up three separate times.

The first was when I was out to dinner with six other people, and we were settling the check. One person pulled out his iPad and said that he’d pay and then charge our credit cards rather than saddle the server with seven separate checks. And since we all had to get to the meeting at Rochester’s Apple CIDER user group to listen to TidBITS publisher Adam Engst talk about Lion, the extra speed was welcome.

Later that evening at the meeting, our treasurer offered Square as a payment option for the first time. Apple CIDER members looking to renew their memberships or buy items from our speed auction could participate even if they had forgotten their checkbooks or hadn’t stopped at an ATM for cash.

The third and final usage of Square that evening was mine: when doing my parental duty by flogging Girl Scout cookies for my daughters, I offered to swipe a card and take the order down on my iPad.

Clearly, Square is going mainstream. For me, this day couldn’t come quickly enough! Before Square, created in 2010 by Twitter co-founder Jack Dorsey, accepting payments via a mobile phone had never been practical. There were ways of sending a purchase request, but it was up to the buyer to complete the purchase. In contrast, mobile transactions with Square are easy and efficient. As a freelance computer consultant, using Square means that I get paid more quickly and spend less time at the bank depositing checks.

Improving Casual Transactions — Cash and checks have intrinsic downsides as ways of exchanging money between individuals. Cash is convenient as long as I’m paying in evenly divisible amounts, and if I happen to have the right amount with me. Reimbursing a friend $11.38 in cash for my share of dinner is annoying if I have only $20 bills from the ATM in my wallet. Checks are convenient, too, because I can write them for any amount that my bank account can cover, but I have to have my checkbook and a pen with me, and even then, they’re a little clumsy. What’s more important is that cash and checks work for both the person paying and the person receiving the money,
even though making change and depositing checks are fussy.

Square opens up to individuals the option of accepting the third major payment method we use today — credit/debit cards. The payment side is far from new — we’ve all been paying for things with credit cards for decades — but until Square, receiving money via credit or debit cards was far beyond many small companies, much less individuals, due to the effort of setting up the necessary “merchant account” and dealing with the fuss of processing cards.

As a result, Square becomes compelling for anyone who needs to accept payments quickly and easily. Like cash, Square payments happen instantly (well, overnight) without having to take checks to the bank. And as with checks, buyers can always pay with “exact change” because sellers can type in any amount they want.

Square has several other attractive features, too: because the Square card reader connects to a mobile phone or other device that you’re likely to have with you, it’s portable and convenient. Losing or damaging your reader isn’t a catastrophe either, because it’s free and doesn’t contain any identifiable data. And both the iOS and the Android versions of the Square app are also free.

Let’s look at buying and selling in a bit more detail.

Buying with Square — Making a purchase from a Square-equipped seller is easy, and follows these steps:

  1. Once the seller has your total, you swipe your credit card through the Square reader, just as you would with traditional credit/debit card readers.

  2. You’re asked to “sign” the face of the device’s touchscreen, much as you would in one of the newer integrated card readers in many grocery stores. You can sign with either your finger or a stylus; many store card readers don’t accept finger input.

  3. The Square app sends your payment request back to the Square servers for approval.

  4. If the payment is approved, you’re asked if you’d like to receive a receipt via email, or via text message to your cell phone. Notably, receipts sent via email contain a map of where the transaction took place.

For security and privacy reasons, sellers never see your credit card number, nor any contact information that appears on your receipt. This eliminates the concern of a rogue waiter in a restaurant recording credit card numbers in back while working up your bill.

Selling with Square — Obtaining a Square Reader (what Square calls the magnetic-stripe reader) is easy: Fill out the form on Square’s home page and they’ll ship one to you for free. In my case, the reader took several weeks to arrive, but I hear they’re coming more quickly these days. If you need to have the reader right away, they’re available for $10 at the Apple Store and Target now, and soon at Walmart. Square credits you back the $10 when you sign up.

Square does require that you provide them with enough bank account information to make deposits. I found that it took only a couple of days for them to confirm my accounts.

Once you have the reader, and Square has confirmed your banking information, you log in to your Square account using the Square app, and you’re ready for business! I found the Square app to be quite flexible. I could adjust settings about when to collect signatures, whether or not to add sales tax (and at what percentage) to a sale, and specify if I wanted to allow tipping.

Square offers the option of skipping signatures for card payments under $25. Skipping signatures for small payments saves time, but (curiously) prevents customers from leaving tips.

Though the iOS versions of the app are nearly identical, there is one advantage to using Square on an iPad. If you sell the same items repeatedly, you can define those items ahead of time in the Square app, and then group them onto a “shelf” to keep them organized. Each item gets its own button, which can either be a color label with a few letters on it, an existing picture from your Photos app, or a new photo from the iPad’s camera. I used the Shelf feature to make buttons for my daughters to sell Girl Scout cookies. One button for Thin Mints, another for Samoas, and so on. Each button was color-coded to match the color of the cookie’s box.

The sales process is simple, just like the purchasing process:

  1. You enter the total to be paid, or pick items from a pre-defined shelf.

  2. You tap the Charge button and specify whether the transaction is cash or charge. (Square can keep track of cash transactions to centralize your record-keeping.)

  3. With a physical card present, you swipe the card, and hand your device to the customer for them to review the transaction and enter their signature. (To prevent accidents, it’s a good idea to protect your device with an easily gripped case.)

    Alternatively, if you’re performing a CNP or “card not present” transaction (if you were taking payment over the phone, for example) you type in the card number, the expiration date, CVV number, and the cardholder’s billing ZIP code; these additional pieces of information guard against fraud. Square’s fees are slightly higher for CNP transactions because of the increased chance of fraud.

  4. After the transaction is approved, Square sends you an email confirmation containing details of the sale. The email you receive, unlike the formatted email sent to the purchaser, is text-only.

Square can process payments from any U.S.-issued and nearly any international credit, debit, pre-paid or gift cards that have Visa, MasterCard, American Express, or Discover logos. When you make a sale, however, you don’t get the funds immediately; instead, funds are held overnight and deposited to your bank account the next business day. (This is entirely reasonable, and similar to normal merchant accounts.) The Square User Agreement provides the details about how payments work.

The barriers to using Square are almost non-existent. Sure, you need a compatible mobile device with Internet access, but the magnetic card reader and the Square app are completely free. Square does not require a contract: the service simply takes 2.75 percent of the transaction when you swipe a card, or 3.5 percent plus 15 cents for CNP transactions. Those percentages are entirely reasonable, and in some cases, lower than a traditional merchant account.

The flat transaction fee and complete lack of a contract are the other revolutionary components of this service. Typically, taking credit cards has been left to companies that can justify the fees and hassle associated with having a merchant account. These hassles typically include a multi-year contract that includes renting bulky and often-primitive point-of-sale terminals, paying monthly processing and reporting fees, paying different rates depending upon the card used, and performing all sorts of end-of-business-day processing. Furthermore, merchant account fees are often calculated based on the risk associated with your sales volume, what ZIP code you sell in, and the category of products you sell.

For one business near me, Square’s flat rates justified abandoning its current card service provider altogether!

Portability and Novelty — The novelty of swiping credit cards with an iPhone or iPad is a good sales tool, too. My wife was recently in charge of a “merch table” at an event. She set up 40 items on a Square shelf in 30 minutes and enabled sales tax at the appropriate percentage. By the end of the event, she had processed over $3000 in sales, including a 50-percent increase in sales for raffle tickets because customers could use their cards long after their pocket-money was gone.

It’s easy to envision Square readers being used anywhere informal transactions take place. Garage sales and farmers’ markets are the most obvious, but Square would also be helpful for in-person service industries. Massage therapists, plumbers, electricians, food vendors, Craigslist sellers, even teenagers mowing lawns — the list goes on and on. Check out Square’s YouTube video for more examples.

I think it’s fantastic that Square has removed obstacles from the path of anyone who needs to be able to accept credit or debit cards in payment for products and services. It’s a big win for individuals and small businesses, and being able to use Square with common iOS and Android devices makes such transactions even more attractive.

[Dennis Wurster provides Mac-focused expertise to businesses in and around Rochester, NY. He has written for Ziff-Davis’s “Mac Administrator’s Journal” and presented at the User Group Leadership Conference. Dennis is a certified Apple Product Professional and currently blogs the solutions he discovers at Mac Smarts.]

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