A white plastic "cube"* that is slightly bigger than a thumb tip protrudes from the top of an Android phone. A thin slit runs through it; peek inside and you can make out the interior metal nub capable of reading any credit card that swoops through it.
This is Square, an accessory to the recently released Android version of an iPhone app (hands-on) that's aiming to revolutionize personal mobile payments the way that PayPal first simplified payments online. We demoed the Android version of Square at the Google I/O developer conference on Wednesday in San Francisco. We walked away with an activation code and that lightweight peripheral burning a quadrangle in our pocket, giving us a sudden desire to sell T-shirts from our car.
Square, so named for its pivotal cube-like plug-in, accepts credit card payments from individuals and digitally tracks both cash and credit transactions. Photos you take of the merchandise serve as a reference point, and your own account mug reminds the payee with whom their money has just exchanged virtual hands. The Square app securely shields the payer's credit card details so the payee never sees the credit card number or security code, then e-mails or texts a digital receipt.
After downloading the app from the Android Market and going through the sign-up process, Square will mail you the free card-swiping accessory.
There are two points of interest regarding Square that especially itch our brain. First, Square is clearly battling PayPal for the same cut of your pocket change. And why not? There's money to be made when one deals in money, especially when those piles of cents add up.
Square charges the seller 2.75 percent of the total plus 15 cents for every card-swipe, and 3.5 percent plus 15 cents for transactions made with a manually-entered card number. PayPal makes anywhere from 1.9 percent to 2.9 percent of each sale, plus 30 cents, based on PayPal's tiered pricing structure for e-commerce, and 5 percent plus 5 cents for each micropayment.
PayPal made some sizable cash by undercutting banks' transaction fees and by getting users to voluntarily swap money among bank accounts, courtesy of PayPal's service. Square is headed in roughly the same direction, but with a few start-up advantages. Square already benefits from PayPal's proven success in priming users to trust a third party with their bank account details--or at least a dummy account--and the addition of a physical card-swiper turns Square-holders into independent merchants who can now process your credit card on the spot.
This leads us to a second point of interest. The quick exchange of funds through the more casual channels of PayPal, Square, and other money-transfer services like TwitPay, make it easier to set up and scale impromptu, informal businesses. We hesitate cracking open a can of legal worms, but we can see how Square's card-swiping "cube" could quickly support its own branch of the informal economy.
* For the geometric sticklers among you, since not all of the Square's six sides are equal, it's technically not a cube but a hexahedron.