The same will be the case here: Unless the fraud takes on truly endemic proportions, far higher than for credit cards, they'll just eat the cost.
For a counterexample, see Paypal. Paypal's unresponsiveness to fraud situations is legendary, because it's not their money at stake and as legally-not-a-bank they can simply stick their customers with the loss. (Paypal's customers are merchants, I don't mean end-consumers here.)
Getting back to Square, as long as they're not regulated like a bank, they will in the long term become more like Paypal in dealing with fraud. The founders may be able to delay or mitigate this with a strong organizational commitment to customer service, but that would be pretty unprecedented in the financial industry; the bottom line always looks better when the corporation can push fraud costs off of itself.
As long as Square uses cards for funding, it will be robbing the poor to pay the rich just like every other card company. To me, "disruptive" in the payments world means no cards, period.
With the transaction taking place without any physical handling of any paper or plastic, using a card as a payment source is just an implementation detail. It'll be trivial in the future for Square to add alternate funding sources without any pain to the user, and in the mean time it drives adoption because people are already used to the idea of giving Square their credit card info.
To reference your Visa point (which I suspect wasn't serious), Square was card-based long before the Visa investment.
Why couldn't they partner with another institution that already has the appropriate licensing? Or, alternatively, they seem well enough funded to be able to post the appropriate bonds.
I get your position, but with the constant whining, you're not winning over people.
Second, a lot of people consider the particular fight I've chosen to pick fairly important, as it would do a lot to corrode the monopoly that banks hold on payment processing. So one person's whining is apparently another's heroic battle (not my words).
Third, the issue of money transmission licenses is also directly relevant to this particular topic.
But I'm worried that you are starting to get into RMS territory... that most of what I read from you here is on this one issue, from a very distinct viewpoint. I'm not saying you're wrong (or that RMS is), just that such a myopic view isn't always the best way to win people over to your viewpoint. Even worse, you risk people tuning you out.
Maybe I'm just getting a sample bias because your most recent posts and comments have been on transmission licenses.
Also I'm guessing that what Square currently does already requires a money transmitter license, since transmitting money is exactly what they do.
From a cursory look, I was under the impression that they would need a license in every state that they'd do business in.
Square is exempt from the California Money Transmission Act per FC § 1805(d) (see http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin...), since it's actually JPMorgan Chase Bank, N.A. that is moving your money.
Square does not have a license.
And Square has no plans to get one as of last month.
Would it not be possible for them to partner in the same fashion to do direct debit?
That being said, the payment ecosystem is a pretty messed up place, even though the ugliness is all pretty much abstracted from the customer. The interchange fees charged to the merchants at times rival their margins on the items they sell. And it got ugly because it was essentially a duopoly and the stakeholders including Acquirers (MC, Visa etc) and the Issuers (Credit Card Issuers) and the POS vendors all had a pretty good reason to keep things the same.
When things are messed up because we do not have enough choice, do you think it would be preferable to hand over the keys to this to a single player - in this case Square? If Square controlled both ends, owned the customer as well as the merchant POS, and cut off everyone else in the process (by going directly to your bank account), then how long before Square starts bumping up the fees it charges each merchant? Couple that with the fact that Square will own the customer, and is in control of delivery of targeted merchant offers, and you get a sense of the size of the pie they would like to own. Anyone agree if that is a good thing? I certainly dont.
The reality is, the ecosystem will be a lot more fragmented this time around than it currently is. The various mobile wallet initiatives (and there are over 70) will eventually coalesce around a few major players, but we will be using NFC driven mobile wallets (GWallet) and Cloud based mobile wallets (Paypal/Square) and the traditional plastic form factor for a long time to come.
Square is a disruptor. And they have created a beautiful customer experience and has spurred the reinvention of the check out process. They inspired several, including me, to see how the status quo was so messed up.
Square needs to allow other POS vendors to use their APIs to truly conquer this space. Their system is currently woefully inadequate for anyone except small businesses with literally no need to do anything except charge a customer right away, without any paper receipts. That limits their business market to essentially small coffee shop or retail vendors with technologically advanced customers. That's a...small market, to be polite.
And if the customers were the ones footing the bill for the check-out process, it might have a market.
Until <newfangled POS> gives the merchants a financial reason to switch, they will keep doing things the way they've been doing things.
Uh, it doesn't sound awesome to me at all. It sounds annoying and frustrating. Swiping a credit card is already pretty simple.
> then tell the cashier your name
Yeah, because that works great. My name is fairly common, and cashiers still manage to get it wrong, especially if it's noisy. Also, what happens when three "John Smiths" walk in?
EDIT: They do address the multiple "John Smiths", missed that in the article.
> For instance, because Card Case can notify a coffee shop when you walk in the door -- and because the cashier can see your profile, and can see that you usually get a medium mocha and a croissant -- the barista can get your drink started for you while you’re standing in line.
If a restaurant's going to go to all the trouble to install a system like this and set it up so that my phone can pay them, why couldn't I just order on the phone? Then I wouldn't have to stand in line at all, and they won't have wasted their time if it turns out that I want something else instead of what I usually get.
Because a smooth face to face interaction is much more pleasant than ordering via an online application. "Half-caff mocha, large, with extra whip cream" vs "open web site, look for mocha, select size, special request... extra whip cream, agree to pay..., submit". That's a crappy experience. The online order only makes sense if the face-to-face experience sucks worse, which shouldn't be the case.
Also because this system doesn't require you to get out your phone every time. Just once, and then it works transparently.
And that is the thing I loved the most about this concept. It is one of very few recent technological innovations that actually enhances face to face social interactions.
By requiring you to tell your name, you now have an "excuse" to introduce yourself and get on a name basis with people you often see day out and day in but who most people might otherwise have a very impersonal contact with.
Just try giving shop assistants eye contact. Most places they're not used to people even looking them in the eye, and the entire quality of your experience and interaction with them go up tenfold if you make sure to make eye contact and smile. But we tend to mumble down into our wallets stuck in our own worlds and ignore that there's a human on the other side of the till. I used to do that as I'm strongly introverted normally, but a few years back I started forcing myself to focus on peoples faces whenever I pay, or enter the bus or whatever type of transaction it is, and it makes such a difference in overall degree of human contact (and it makes the response you get from the other person dramatically more friendly)
As an example, there's a bus driver who frequently drives my local bus, that I've gone to the same gym as for more than 5 years. I never even recognized him until I decided to start focusing on giving more eye contact. Now we greet each other warmly and talk whenever we see each other.
I thought this was "just me" before I took action to change it, but the more I did it the more I saw how taken aback a lot of the people I did it to were, and how out of their way a lot of people I'd give eye contact would go to do things for me - as it turns out even otherwise very social people often completely blank people in these situations. We "switch off" socially in large number of situations.
I think Square could have the potential to be far more important to the world for its possibility of disrupting social interactions than its mere impact on commerce...
I suppose it's possible that coffee is different in some non-obvious way, but I'm not sure how.
Let's also not forget that Square is presumably not just targeting coffee shops and restaurants with this. You can take a sweater to the register and pay with card case.
If a restaurant's going to go to all the trouble to install
a system like this and set it up so that my phone can pay
But I'll bet that tap-to-order is on its way.
and then you get these niceties on top, too
This is amazing in terms of ease-of-use. However, the privacy implications are a bit worrying...
I don't really want to rubbish this, I hate the naysayers when something disruptive comes around (note that Japan rolled out pay-by-cellphone on their subway systems something like 10 years ago) but...
"She saw my name and photo on her iPad, tapped it, and I was done. A receipt was sent to my phone."
So all employees at stores using Card Case can see the name, identity and photo of every single person using card case within a 100 foot radius of the store. Completely regardless of whether they want to buy something or enter the store. What if you don't want random stores to know when you walk past? What if your abusive ex-husband is working at a store and sees your name come up on the list.. etc.
Additionally, if you use the app, Square knows exactly where you are at all times. I'm not at all comfortable with that. Apple had a massive scandal when it was revealed that it's technically possible to retrieve location history from iOS. This is legit human tracking - police and three letter agencies everywhere are probably throwing parties right now.
HN was up in arms when retail giant Westfield was tracking number plates entering their car park. Just number plates.
</token dude posting about privacy issues>
First, you need to turn on auto-payments for each individual store where you’d like to use it—it’s impossible to tell Card Case to turn on auto-payments for every store in San Francisco.
That's absolutely not true, at least not on iOS. As mentioned in the article, Square is using the iOS geofencing APIs to wake the app when you enter a favorite area. The app isn't running in the background all the time.
Also, as mentioned in the article, you can turn this feature off and manually toggle the tab.
Cash provides me that privacy. Heck, credit cards even keep the transaction between me and the merchant.
I understand the privacy concerns, but this isn't a secret agent movie. I'm reminded of that scene from Jurassic Park..
Nedry: Ooh! Dodgson!
he sits down
Dodgson: You shouldn't use my name.
Nedry: (loudly) Dodgson! Dodgson! We have Dodgson here! Nedry: Nobody cares. Nice hat. Trying to look like a secret agent?
Say I am meeting someone that I wouldn't want to normally be associated with - whether it's for a job interview or a personal meeting.
Or say I plan to pick up a Playboy magazine at the same counter.
Or say I'm a cute woman, and I prefer not to be stalked.
Or say I don't want that sales guy over there to come up to me and pretend to know me.
Or say I was just overheard saying that my kids are all alone at home.
Or say I just got out of an expensive car.
Or say I was having a bad day and complained loudly.
Or say I farted.
I could go on and on.
Perhaps a credit card.
If you opt in, you have no privacy.
And if this does become ubiquitous (I suspect it won't, but that's just me), opting out will be painful. Very painful.
Thanks, but no.
This might not happen much in practice, because the cashier would be found out later (assuming they must login). However, the opportunity doesn't arise with existing transactions, where you must physically hand something over (cash/card), and usually get an opportunity to verify the amount, so there's no evidence either way. It will be interesting to see if this is actually a real issue, in practice, in the current roll-out.
Many, many cash-alternatives have been tried and failed, but this one has a new technology (iPhone geofencing) and smart founders. If it does work, they could quickly revolutionize cash - globally (not to mention be the killer-app for the iPhone).
An exception I see is that it works even when your phone is off, so you wouldn't be aware of the notification (or so I assume - do some phones buzz/beep, even when off?) Of course, it makes it riskier for a malicious cashier. I suppose they could check who has their phone off first, but the risk is certainly mitigated.
I wonder if a security feature they could add would a two-factor authentication where your phone would display a one-time use auth code that you'd give to the cashier to approve the transaction, for those that are worried about automatic billing.
What if my phone's battery is dead ? Does that mean I can't buy anything ? What happens in an emergency ? Credit cards are easy as they're quite low tech physically (a magnetic strip, a chip and some plastic).
Other things would be stuff like: not everyone has a phone, but would still like a credit card, etc. There are countries where phone penetration (and not even smart phone) is not very high, but the population still need to have credit cards.
Granted, I can see it being used as an alternative, but doubt it will be the "end of credit cards"
Go to an ATM.
> There are countries where phone penetration (and not even smart phone) is not very high, but the population still need to have credit cards.
There are also countries where SMS payments are much more popular than credit cards. It's not a one-payment-system world.
Exactly, and you end up using a "card" anyway
Using a card on the extremely rare occasion that you forget to charge your phone is a world of difference from using it 10 times every day.
Please let it work.
Their software is far too simplistic for anyone running more than a very basic coffee shop with tech savvy customers to use. Even something as simple as most customers demand paper receipts, and Square's functionality is taking basic orders, one a time, with no conception of any business analysis functions. That does not cut it for any business bigger than a small coffee or retail shop, where customers pay and are served instantaneously. no matter how cheap Square is, or how many brilliant designers they hire, they're not going to get into businesses bigger than this without expanding what they're doing.
They really, really, need to launch a platform for people like us to innovate on. We're young, forward-thinking, and as an ex-restaurant employee I know how much CC companies and traditional POS companies screw businesses.
We're trying to change that on the POS side, and I desperately wish Square would be less egotistical and let us use them to change the payment side. It would be tremendous for them, because it lets POS companies solve adoption for them, instead of them trying to engineer 1000 solutions for 1000 different types of business, and let's them focus on their core compotency - beautifully designed software for consumers.
And they are building a platform. They will likely to open it up sooner rather than later too, they just can't take on CC companies alone.
Sure, I've been hearing forever that they must be going to, eventually, etc etc. hasn't panned out and it's been literally years
Don't confuse where a startup is today with where they're headed. Sometimes you have to tack against the wind to get to where you ultimately want to end up. The best startups are those that can make money while also setting up for a huge play that no one else is positioned to pull off.
This also brings with it a new source of analytics and marketing opportunities (for better or worse?).
A coffee shop cashier could be told (through product suggestions on the iPad they use) that you've missed your regular lunch up the street and to offer you something to eat.
Online ads could now be targeted towards you further, based off what you purchased in the real world (that coffee and muffin) because the purchase was matched to you, and your iOS Device ID.
A new round of marketing is possible by tying in real world/daily purchases and being able to push that information back to retailers (in the form of product recommendations or analytics for them), as well as advertisers.
Also, I have some doubts about the human face recognition bit. Will it work in a crowded environment, with stressed-out clerks?
Phones get stolen all the time and it doesn't sound too remote that someone picks your phone and walks into a shop with a big pair of shades and a 4 days beard.
1) How is it going to move away from being based on credit cards?
Most savvy people I know use credit cards wherever possible because of the no-liability fraud protections that are not present in debit transactions. Clearly, Square users are younger and savvier than the general population. No way should anyone use bank account-based payments on a mobile device that could be stolen/hacked/lost because you're not going to get the money back that is fradulently charged.
2) Do you really want to have a shopping experience where store cashiers and other customers standing around know your name?
Most people I know would prefer to remain more anonymous than that.
3) Where is the verification of customer payment (e.g. signature on CC receipt)? What happens when there are customer chargebacks?
4) Is it really that hard to pull out and use a credit card?
I'm all for improving the current payments environment where a few major companies (Visa, MC, AMEX) dominate and as such, are able to extract large fees from merchants (which get passed along to consumers), but I don't see Square (or anyone else) as having found the answer yet. Their attempts seem to be more "cool to have" and technologically impressive than actually solving the underlying inefficiencies in the payments industry.
And frankly, the major credit card companies are going to come out with their own NFC apps at some point and if Square is still relevant, they'll be just another player in the oligopoly (but still dependent on the others' back-end processing component).
Getting rid of the flat fee that traditionally accompanies credit card transactions was also a smart move to further open up new credit card processing markets.
The Card Case? I'm not sold in its current state. This article, like pretty much every article describing the latest "wouldn't it be great" payment product story, describes a process that sounds quite a bit worse than a simple swipe of a 2mm thick plastic card.
That said, there is still some friction when it comes to using a card... some places want you to sign, some don't, some decide on the day... people offer you a paper receipt for a $2 transaction ("No, I really don't need it.")... it's sometimes finicky trying to deal with a wallet full of cards... It's all not all that much really, but there is still room for improvement.
What I really like about this is the end-run around NFC. NFC really doesn't solve the problem, because is is just as easy to pull out a wallet as it is to pull out a phone. Here you don't need to rummage, you say what you want and go. That's 15-20 seconds of your life back per transaction.
Why do you have to have a smartphone to do this? If you're going to get businesses on board and use photo IDs to verify every transaction, why not just have the signup process be a webcam and a form?
There's a couple of cool usability things you can do with a smartphone (proximity pushes users that are there to the top of the list in case of name conflicts, whether it's from geofencing, manual inputs, or side-channel geo info), but the basic idea of registering for a store doesn't seem that novel. Why not slap a decent search UI on it and give all the cashiers iPads?
Is this idea so novel that nobody thought you could look up a name and photo via the web at point of sale before today? And if the idea isn't novel, why hasn't anybody successfully executed it?
I wrote a response to his original piece a while ago:
What Square has done with card case is pretty slick, but at present it doesn't scale. Paying with your name doesn't work at Wal-mart. And funding with your plastic credit or debit card doesn't work especially well for most coffee shops or other small businesses that want to save on interchange fees, not pay more of them.
I look forward to competing with Square again when I get my California license.
And that's without assuming Wal-mart adds any extra hardware that could narrow the position of handhelds to individual registers.
I obviously appreciate the simplicity of paying with your face.
Keying the name is a bigger issue... so I suspect terminals in larger retailers will eventually just detect the N nearest pay-eligible handhelds.
In contrast, barcode scanners are already there and they typically emulate keyboards, so no special integation is required.
I'm not convinced that paying with your name scales for most retailers. The retailers I've talked to aren't convinced, either.
I suspect in coming years, multiple systems will all work together to train users to bring up barcodes on their handhelds for specific purposes (as with boarding passes or "Jonathan's Card").
That'd cut down the search space dramatically.
The general point of scale issues still is valid, but culling the list of payers seems surmountable.
Identical twins and celebrity lookalikes may still present problems.
Or just someone that doesn't care about their job that much putting their friends pack of gum on the same tab as the guy being 100 things.
I also think using photos is one of the most surefire ways of identifying the buyer, as well - it had a nice effect on credit cards (with photos on them, you can't just steal one and use it for whatever) and it can definitely help curb fraudulent purchases with Card Case.
A completely different set of competency and technology will be required to replace the credit cards with their own payment solution (credit risk assessment, fraud prevention etc). Their impressive track record so far means they can certainly develop these; but it won't be that quick or easy.
Seems to me this same app could be built for Bitcoin, and you could eliminate or reduce the 2.75% service fee. Or you could make it 1% and give it back to the purchaser in the form of points (like credit cards).
Bitcoins could be instantly converted to cash, for a fraction of that fee (about 0.6% using a Bitcoin exchange).
How would a similar scenario play out in the Card Case universe? I wasn't allowed to have my own credit card until college and I would never use my debit card for common house purchases.
Chip-and-pin means I rarely carry cash, I don't really see this as an improvement on putting my card in a reader and entering my pin.
It's cool to see that there's a larger plan unfolding. Credit card networks are tough nuts to crack and it looks like they've found a way. Kudos.
Card Case doesn't happen to have an API, does it? ;)
The difficulty and hence lucrativeness of financial transactions depends on size, distance and familiarity. A large transaction across the world between two strangers is the riskiest/hardest/most expensive. A small transaction face-to-face amongst friends is the opposite.
- anyone in the room knowing your name can get free cookies (or anything else)
- signal travel through air, so physical hack is not necessary anymore
- its still tied to your phone ;-)
the rest is pretty cool, but i'd like to confirm manually each transaction thank you very much. I want to keep control of MY stuff, my money, my phone. My my my.
Geofencing is a big deal and I first heard of it... today. How long have iOS devs known? Since WWDC?
How does the system handle the common use-case where you give a third party (wife,friend,kid,..) the money to go and pay the bill.
Both Facecash and now Square Card Case have this problem, but maybe I have missed something.
Same as with credit cards: There'd be lots of fraud complaints. Square will realize there's a problem and depending on what their contracts look like they'll either charge them heavy fees and/or fine them to fund having to deal with the fraud, or cut them off.
Credit cards has this exact same problem. Physical control of the card pretty much gives you free reign to pay for stuff - most shop staff can't even be bothered to look at the signature or ensure the name has any chance of being yours.
> How does the system handle the common use-case where you give a third party (wife,friend,kid,..) the money to go and pay the bill.
The article states the current app already allows you to press a button to pay, so presumably you just forgo the convenience and make them press the button if their face doesn't match up.
And/or add a way of adding additional authorized people whose images will show up.
And does it offer reward points?
If not I'll stick with plastic.
What happens when you're chillin' on the street, and your arch nemesis has hacked your favorite coffeeshop's PoS system, nabbing your account details, phone identifier, and photo, and proceeds to stalk you all over town from a distance of 100 feet?
The special sauce here is the location tracking. The system seems to assume that vendors are at a fixed location, but there's probably no reason a mobile device couldn't be constructed that functions as a PoS, and with hacked data/credentials, it could be used for tracking purposes. Say, with a number of confederates (or a good make-up job), charging stuff to your account while you're in the area. Or insert intelligence, criminal, stalker, jealous ex, etc., scenarios.
I'm increasingly in favor of cold hard cash for transactions rather than divulging my personal information in ever increasing amounts and rates.
They are really kicking butt.
Wait a second: Why is this supposed to be any better than pulling out a credit card? It’s not faster, it’s not more convenient, and it’s not any safer.
Yes it is. Just having an RFID card + POS reader is awesome. Putting the chip into a phone is even more awesome. If you don't believe me, move to Japan for a few months and live the dream. ;-)