ePayments Week: Square rounds up

Square secures more funding, PayPal's mobile strategy gets a nod, and thinking about the impact of more iPhones.

Here are a few stories in payment news that caught my eye this week.

Should Square lose the square?

SquareSquare, the mobile payment system that lets anyone take credit-card payments with their iPhone, said it has raised another $27.5 million in a round that funded the company at about $240 million. The startup has been watched closely since day one, partly because Twitter co-founder Jack Dorsey is a founder here, and partly because of the simple square block that snaps into the iPhone’s audio jack and turns it into a credit card terminal.

But Business Insider has some unexpected advice for the start-up: lose the dongle. Although Square’s square is an iconic attention grabber — part of its system that is, in the words of COO Keith Rabois, “an intuitive product that anyone can use as easily as a microwave” — it also makes the Square system dependent on credit cards. Since Silicon Valley startups are “about disrupting dumb, slow incumbents,” Business Insider wants Square to dump the credit cards and turn to a more 21st-century way of transferring money, like Bump’s PayPal API.

Meanwhile Intuit, which also has a card reader that attaches to the iPhone 4, has caved to peer pressure and decided to offer a plan that gives its GoPayment hardware away for free, just like Square does. Last summer Intuit teamed up with iPhone peripheral maker Mophie to offer its Complete Credit Card Solution for $179. The new plan makes up the difference by taking a bigger cut from credit card transactions (2.7 percent instead of 1.7 percent, which is still lower than Square’s 2.75 percent).

Are you using Square or GoPayment? I’d like to hear your experience. Drop me a note.

PayPal’s mobile strategy gets a nod

JJ Hornblass, who blogs at BankInnovation.net, gave his Best Mobile Strategy award to PayPal for acting on the conviction (sooner or more assertively than most payment providers) that “the payments battlefield shifted irrevocably to the mobile front in 2010.” Given that PayPal has been experimenting with mobile payments since 2005, one suspects the company actually made the mobile shift a few years back.

Now PayPal appears to be waiting for its customers to catch up. Hornblass links to a BNET video from a mobile conference in October 2010 with PayPal’s Osama Bedier saying that PayPal expects to process $500 million in mobile payments for 2010, up from only $24 million in 2008. Bedier says the time is right with smart phones, apps, and customers all finally reaching critical mass.

While they may be a leader in mobile payment strategy, PayPal still has plenty of runway. Fellow Bank Innovation blogger Nitin Gupta says that most PayPal customers make only one transaction per year, leaving PayPal’s transaction volume far behind payment champs Visa and MasterCard (according to this chart from Silicon Alley Insider).

Verizon expands iOS market

Verizon’s long-awaited announcement that it would offer the iPhone can hardly be categorized as news, given how long it’s been anticipated. But it did create opportunities for reflection on how this would further spur the growth of mobile commerce. Mobile-Financial.com pointed out that between Verizon and AT&T 180 million subscribers in the US will soon have access to the iPhone, and many pundits (particularly those in the Northeast US, where Verizon’s network is strong and AT&T’s weak) relished the chance to switch carriers so they could actually use the device to successfully make calls. New York Times tech columnist David Pogue even offered a tip to pay off early-cancellation fees: sell your AT&T iPhone to Gazelle.com, which pays for gadgets in order to keep them out of landfills.

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