Square Announces a Signature-Based Chip Card Reader, with Availability Early in 2015

Square Inc. on Wednesday ended months of speculation with an announcement that it will begin offering an EMV card reader early next year. Square will start taking orders for the device, which will process chip-and-signature as well as mag-stripe transactions, later this year, the San Francisco-based company said. The move comes just 14 months ahead of a key U.S. EMV deadline.

Square did not release pricing information for the reader, but it is widely expected to be significantly pricier than the existing mag-stripe dongle Square has offered for the past four years. The existing reader sells for $10 in retail stores but can be ordered for free directly from Square. The technology necessary to interact with EMV chips will drive up the cost of the EMV reader and make it unlikely Square will offer it free, experts contend, though in a blog post Square says the new reader will be “incredibly affordable.”

“We will release pricing details for the Square Reader for chip cards soon,” says a Square spokesperson in an email message.

Square is also working on incorporating EMV capability into its Square Stand product, according to the blog post. Square Stand holds a point-of-sale tablet for countertop merchants and has a built-in card swipe.

EMV stands for the Europay-MasterCard-Visa standard for chip cards. The United States is the last of the developed nations to adopt the standard, which will be required of all U.S. issuers and merchants by October 2015 to avoid liability for counterfeit card fraud, according to rules from Visa Inc. and MasterCard Inc.

That timetable has led many observers to question how Square intended to deal with EMV, given that it has distributed approximately 5 million of its famous mag-stripe dongles to U.S. merchants. The company has also entered both the Canadian and Japanese markets, which have adopted the EMV standard.

Like the existing reader, the new EMV reader will attach to smart phones or tablets through the mobile device’s audio jack. Users will run transactions, however, not by swiping cards but by dipping them lengthwise into the reader’s slot so the reader can interact with the chip on the card. The card will also need to be left in place in the reader for the duration of the transaction.

Square did not invent mobile card acceptance but did much to commercialize the technology. Now, with the EMV reader’s introduction, Square is preparing for the chip card standard but is also playing catch-up. A number of competitors, including AnywhereCommerce, MagTek Inc., and PayPal Inc. already offer EMV-capable dongles for mobile acceptance. Indeed, these days such technology is “table stakes” for such companies, notes Eric Grover, principle at Minden, Nev.-based payments consultancy Intrepid Ventures.

n

While Square may be late to the EMV game, Grover says that’s understandable. “Square primarily serves small and casual merchants, most of whom are unaware of EMV and reluctant to pay for extras unless there’s something tangible in it for them,” he says via email. “Most small merchants who upgrade to an EMV terminal will do so because their ISO or acquirer tells them they have to or sells them on it.”