For Mobile Payments, It's Hip to Be Square

After a recent ski trip in California with friends, I needed to reimburse one of them for the rental gear she'd picked up on my behalf. Except I didn't have my checkbook handy, and she didn't have an account with PayPal. So the following steps occurred: I flew across the country to obtain and fill out a check. I mailed it back across the country for her to endorse and deposit. The check then traveled cross-country again to my friend's New York–based bank, at some mystical point becoming available for withdrawal. At this point the idea of my debt had traveled more than 9,000 miles over the course of several days, a comically archaic process in an age with such technical wonders as ChatRoulette.

Situations like this are why Square is a big deal. The latest creation of Twitter cofounder Jack Dorsey, Square is a payment service that allows anyone with a smart phone to accept credit-card swipes. And they mean anyone—my ski buddy, a small business, kids at a bake sale. No more bulky machine tied to a cash register: Square will give away a tiny card-swipe-accepter-guy that plugs into the audio port on your device, and a mobile app controls things like entering the charge amount, signing with a fingertip, photo verification, and paperless receipts via email or SMS. A genius promotional video making the blog rounds demonstrates how simple it is:

In the startup world, the only thing better than having a "disruptive" technology is to make something that taps into the flow of money. (You'd be surprised how many startups have only one of those things, or neither.) Square has both. It can quickly take a chunk of the predominantly all-cash Craigslist economy, as well as business from small merchants—say, hobbyists who sell their handiwork, or indie bands selling merchandise at a show—who aren't ready to deal with a bank and take ownership of a "real" credit-card machine. This disruption also stands to make Square and its all-star roster of investors—Kevin Rose, Marissa Mayer, Shawn Fanning, Biz Stone, and others—a lot of money. The company will take either a flat fee or a percentage of each sale that is transmitted through the service, which can quickly add up.

Mobile payments, long popular in Japan and parts of Europe, finally look poised to take off in the United States in 2010. The invention of the iPhone already combined two things you always left the house with: your phone and your iPod. Thanks to Square, you may not need to bring your wallet along, either.