Square, a new mobile phone payment system founded by Twitter co-founder Jack Dorsey, just launched its private beta today. Square will give anybody the ability to accept payment cards without having to go through a costly credit card processing service. Instead, Square will give its users the ability to use their mobile phones, laptops or desktop computers to accept payment cards and swipe them with the help of a small dongle that will plug into the computer's or phone's audio jack.
Square is backed by Khosla Ventures and a team of angel investors. Square's team of advisors includes actress Alyssa Milano, Susan Wu, Ryan Gilbert, Ted Wang and Gregg Kid (who was also an angel investor in Twitter).
According to the information on Square's website, users won't have to sign any contracts and there won't be any monthly fees or hidden costs. Square is currently only working with a select group of companies but plans to expand widely in 2010. In its current iteration, Square works on the iPhone and iPod touch. It's not clear how much the dongle will cost, but chances are that it will be cheap, as the company plans to focus on the service and not the hardware.
Disrupting the Credit Card Processing Business
Credit card processors (the people behind the card swiping machines at your local coffee shop, restaurant or corner store) typically take a hefty cut from every transaction and charge monthly fees.
Square want to be a cheaper, more modern alternative to these systems. Square will email receipts to a payer's phone, for example, and allow merchants to track frequent customers and offer them discounts. In addition, Square will also donate one penny for every transaction to a cause of the user's choice.
Thanks to Square, every stand at a local farmers' market and every small coffee cart or hot dog vendor on the street will soon be able to accept credit cards without having to go through one of the major credit card processing services.
It's worth noting that other services like ePAY and Obopay also offer solutions that allow anybody to accept credit cards, though Square's service looks to be far more elegant than any of the current solutions we have seen.
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