Bullish on the iPad, Square Says It Will Be a POS Game Changer

With application developers rushing to bring apps to market for Apple Inc.’s immensely popular iPad tablet computer, payment service provider Square Inc. is predicting the iPad will become a game changer in wireless payments, and says that it will aggressively pursue developing iPad applications that enrich the transaction experience.

The iPad’s power to transform mobile card payments comes from its tablet-sized screen, which provides application developers more room to deliver additional information about the transaction to consumers and merchants, according to Jack Dorsey, Square’s founder and chief executive and the co-founder of the Twitter social network. San Francisco-based Square was one of the first payments companies to launch an iPad app, which came ahead of its expected launch of an application for Apple’s iPhone (Digital Transactions News, April 5).

Dorsey says he sees small and mid-size mobile merchants initially embracing the iPad as a wireless POS device because the applications being developed will enable it to do more than smart phones fitted with a swipe to read a card’s magnetic stripe.

“The iPad can address a lot of needs for small businesses beyond initiating and completing a transaction,” says Dorsey, who spoke to Digital Transactions magazine for a July story about the iPad’s effect on payments. “Applications that provide back-end analytics for transactions can be written, and more data about the transaction itself can be presented on the screen. Square intends to go after all POS functionality.”

Square’s iPad app allows merchants to itemize the transaction and break out sales taxes, and lets consumers to sign their name on the receipt. Merchants can e-mail a receipt containing that information to the customer. The app also supports icons for products and services commonly used by merchants that, when touched, populate the screen with the quantity purchased and the price, making it easier for the merchant to complete the transaction. Merchants plug the Square Cube card reader in the headphone jack on the iPad, which allows for a card-present transaction.

Additional features of Square’s iPad app include the ability to create receipts for cash transactions that show the amount of the purchase, the amount tendered, and the amount of cash due back to the consumer. Merchants also can track daily sales by item and interface to a screen showing total daily sales volume broken out by tips, taxes, and payment method. Data can be downloaded into a standard format so merchants can use their favorite spreadsheet or money-management software program.

“A lot of this transaction data and these functions are out of the reach of small mobile merchants and small merchants in general, because their cash registers don’t support this functionality,” says Dorsey. “Merchants that want this functionality usually have to build custom apps, which is costly.”

Square’s transaction pricing is 2.75% plus 15 cents for a card-present transaction and 3.5% plus 15 cents for a card-not-present sale. No merchant account or contract is required, Square provides the card reader at no charge, and merchants are not charged a monthly fee or required to generate a monthly minimum in sales volume.

Looking ahead, Dorsey envisions larger merchants adopting the iPad for a variety of sales functions. They include the iPad as a portable information tool that sales staff can use to show consumers images or videos about a product without having to direct them to an in-store kiosk, and as portable POS device that can ring up the sale anywhere in the store. “The iPad provides a migration path from the smart phone to a richer transaction experience and merchants will make that transition as demand warrants,” predicts Dorsey.

Square plans to bring applications for mobile devices and tablet computers using Google Inc.’s Android operating system to market as those devices gain critical mass. “As those markets mature, we will be there. We don’t want to be tied to a single platform,” says Dorsey.

Apple on Monday said iPad sales had topped 2 million since the product debuted April 3. An analyst told Bloomberg News this week that sales could hit 5.5 million units worldwide in 2010 and 13 million next year on higher-than-estimated demand.