Tuesday , September 18, 2018

First It Was Trading Through Cash App. Now Square Patents a Network for Crypto Acceptance

The business of getting merchants to accept cryptocurrencies like Bitcoin has started to attract independent sales organizations and payments-tech firms alike, and now Square Inc. has jumped in with a proposed service that some experts say could help the payments-technology powerhouse grab a share of online volume.

The U.S. Patent and Trademark Office on Aug. 21 granted a patent to Square for a network that would allow consumers to pay with crypto and enable merchants to receive the funds in fiat currency. In its filing to the USPTO, made in September last year when Bitcoin was rising fast in value, Square proposes a system that would interpose a private blockchain to overcome common problems like network congestion, lengthy transaction times, and high miner fees.

Luria: “Square would love an opportunity to expand its acquiring business to online merchants.”

The system, however, would also cap transactions on the private ledger, after which the activity would have to be transferred to the public blockchain. “Once the limit has been reached payment service … can publish the transactions in private block chain … to public block chain … where miners can verify the transactions and record the transactions in blocks on public block chain,” reads the patent language.

The patent leaves open a wide range of so-called embodiments in which the network could operate. It’s also unclear whether existing Square services like its Cash App peer-to-peer payment application could serve as the basis for at least some of these embodiments. Cash App last year began allowing users to buy and sell Bitcoin, and this summer that service became available in all 50 states. Also, one of the inventors listed on the patent application is Brian Grassadonia, a Square executive vice president who serves as general manager of Cash App.

Square did not respond to inquiries about the patent from Digital Transactions News.

Some observers argue the patent could help Square extend its point-of-sale payments service to e-commerce merchants. “Bitcoin technology created an opportunity to reduce online merchant fees dramatically on the one hand, and Square would love an opportunity to expand its acquiring business to online merchants. If Square is successful in creating Bitcoin-based online merchant acquiring, both goals could be achieved,” says Gil Luria, an analyst who follows Square at Great Falls, Mont.-based boutique investment firm D.A. Davidson & Co., in an email message.

That result could depend on the new system’s ability to cut transaction costs, which with cryptocurrency are borne by the consumer. Also, cautions Luria, nobody should look for near-term results at Square. “Square serves very few online merchants in an already well-served merchant-acquiring market, so [it] would have a long way to go before it signed up enough merchants to make this business material,” he notes.

Still, signs have emerged in recent months that Square is far from alone in its ambition to bring crypto acceptance to merchants. Independent sales organizations are acting to get in early on what they see as a growing opportunity. Two recent examples are Tinley Park, Ill.-based Payroc LLC, which plans to roll out a product later this year and Fort Lauderdale, Fla.-based Aliant Payment Systems Inc.

Nor is Square alone among payments companies in winning a patent for a crypto-related invention. Intuit Inc. won a patent earlier this month for a method that would allow users to send Bitcoin via text messages. And in July Mastercard Inc. was awarded a patent for a system that would speed up transaction time for blockchain-based currencies while beefing up security.

Check Also

With Stripe Terminal, the Online Payments Specialist Moves Into Face-to-Face Sales

Stripe, the San Francisco-based online payments company, is taking a step to get inside stores. …