Square, the iPhone Credit Card Machine, Goes Mainstream

By Alexis Madrigal | The Atlantic

I first saw Square’s product when Gizmodo’s Mat Honan whipped one out at a dinner in San Francisco to help us split a check. Here’s how it worked: he ran my credit card through a tiny plastic doohickey (technical term) that attached to his phone. We entered the amount I owed for the pizza, inflated by the price of a couple Belgian beers, and voila, I’d paid him with a credit card.  It was a subtly impressive demonstration of the alternative payment system’s appeal to the tech-savvy. The whole thing was slick and easy, and Square’s pricing — a flat 2.75 percent of transactions — seemed a small enough price to pay for the convenience of the service.

small_square.jpgBut I wondered if it had mainstream appeal. We were on Valencia Street, after all, the epicenter of the Bay’s hipster world, and both of us worked (at the time) for Wired.  Would people and businesses whose lives didn’t revolve around technology toss away their old-school credit card machines? It didn’t seem likely.

Over the last few months, I started to notice Square doohickeys popping up all along eastern seaboard. Coffee shops are using them. Food trucks (@lobstertruckdc, anyone?) are using them. Boutiques are using them. Where hipsters lurk, Square abounds. But what about everywhere else?

I asked Square to make me a map of their transactions to see where they had users. The map you see at the top of the page shows one hour of transaction volume on a Friday afternoon. The size of the bubble represents the volume of the transactions while the different colors indicate the types of users that Square has.

This map is good news for Square, which recently took in a $100 million venture investment and put Larry Summers (yes, that Larry Summers) on its board. Just about every major city and plenty of smaller places have someone using the device. I was particularly to see that the whole southeast is blanketed with Square users.

How were all these people finding out about it? I called up a few customers, one of whom I got a hold of through Square and others through Twitter.

The first business I talked with was The Tree Man nursery in Paso Robles, which is a small city north of San Luis Obispo in central California. Anthony Overturf answered the phone with a laidback vibe that made me quake with nostalgia for the West Coast. I asked him how and why the nursery made the switch to Square. It turns out that local farmers converted the nursery’s owner after their standard machine broke.

“Back in the rainy season, we cover our credit card machine with plastic, but the wind blew the plastic off and the rain hit the credit card machine and we were out a credit card machine,” Overturf said. “We were in the process of ordering one and we went to the Farmer’s market of all places and all the guys there were using them.”

Overturf said it was actually an easy decision because the Square hardware was free and the cut that Square takes was less than they’d paid before. Overturf likes the machine, particularly because it allows him to move around the nursery and make sales on the spot.

aziz.jpgThey did have one big problem in the months they’ve been Square customers. One day, they “made too much money,” Overturf said, meaning they’d charged over $1,000 worth of transactions in less than seven days. That caused their funds to be held for longer than the couple days they had been. That in turn caused problems when they wrote checks against the income and the money wasn’t in the bank. In online forums, that seems to be one of the major knocks on the company. Competitors are hitting them on it, too.

Square, for its part, appears to have removed the $1000 per week limit, or more precisely, the $1000 limit only exists for the first week as Square checks out the transactions being made to ensure they’re not fishy. A company representative said that the cap originally was instituted to protect against fraud, and one presumes that the loads of transaction data they’ve gathered has enabled them to spot bad actors in more sophisticated ways.

And for many customers before and after the thousand-dollar switch, Square is working just fine. A Twitter contact’s wife had ridden in a taxi in Ohio that used the payment system. She’d gotten his card and passed along his contact information to me. I caught the Cincinnati cabbie, Aziz Mabyae (above), during a free moment. He said that his entire cab fleet converted to Square at the request of the company’s owner. After four months of use, he loves the device. “It’s a lot quicker and easier,” Mabyae said. He also noted that relative to their old way of accepting credit cards, it seems more secure for passengers. They also found the technology exciting when it was their first time using it.

Kevin Druff, an IT consultant in Richmond, Virginia, said he used Square rarely, but likes it. He tends to use it for personal things, like splitting the food bill when he goes on vacation with family. He found out about the service the way you tech nerds probably did: from Twitter.

His usage seems to be pretty standard for individuals. Kais Davis of Eugene said he used Square for “rent, settling debts with roommates, poker tournaments, selling collectables, craigslist.” Basically all the peer-to-peer payments a young man might make.

For big businesses, Square can be more expensive than the standard card reader. The entrenched payment companies ask for up-front fees, but then can take a smaller percentage than Square. Purely anecdotally, I haven’t seen a lot of traditional, large businesses switching out their old card readers.

But really, the reason Square is exciting isn’t as a direct swap-out of existing payment methods. Square is exciting because its mobility and low up-front costs allow entirely different types of business to move money with credit cards. Individuals, freelancers, farmers, nursery owners, Etsy DIY types, and a whole bunch of other people can actually treat cards as cash.

And below, there’s a bonus map! It shows one month of Square transactions, representing each as a point.