The End of the Credit Card? New Square app: Card Case

That is what disruptive innovation looks like. "Oh look, a multi-billion dollar problem people were trying to solve by getting two sides of the market to simultaneously ubiquitously install new hardware. How about we solve it with stuff they already own plus new software instead?"

I love Square, and they are a classic disruptor. They started slow, at the low end, and created their own blue ocean before starting to chew at the heels of the entrenched incumbents in the payment ecosystem.<p>That being said, the payment ecosystem is a pretty messed up place, even though the ugliness is all pretty much abstracted from the customer. The interchange fees charged to the merchants at times rival their margins on the items they sell. And it got ugly because it was essentially a duopoly and the stakeholders including Acquirers (MC, Visa etc) and the Issuers (Credit Card Issuers) and the POS vendors all had a pretty good reason to keep things the same.<p>When things are messed up because we do not have enough choice, do you think it would be preferable to hand over the keys to this to a single player - in this case Square? If Square controlled both ends, owned the customer as well as the merchant POS, and cut off everyone else in the process (by going directly to your bank account), then how long before Square starts bumping up the fees it charges each merchant? Couple that with the fact that Square will own the customer, and is in control of delivery of targeted merchant offers, and you get a sense of the size of the pie they would like to own. Anyone agree if that is a good thing? I certainly dont.<p>The reality is, the ecosystem will be a lot more fragmented this time around than it currently is. The various mobile wallet initiatives (and there are over 70) will eventually coalesce around a few major players, but we will be using NFC driven mobile wallets (GWallet) and Cloud based mobile wallets (Paypal/Square) and the traditional plastic form factor for a long time to come.<p>Square is a disruptor. And they have created a beautiful customer experience and has spurred the reinvention of the check out process. They inspired several, including me, to see how the status quo was so messed up.

&#62; Paying for stuff with your phone sounds awesome until you stop to think about it.<p>Uh, it doesn't sound awesome to me at all. It sounds annoying and frustrating. Swiping a credit card is already pretty simple.<p>&#62; then tell the cashier your name<p>Yeah, because that works great. My name is fairly common, and cashiers still manage to get it wrong, especially if it's noisy. Also, what happens when three "John Smiths" walk in?<p>EDIT: They do address the multiple "John Smiths", missed that in the article.<p>&#62; For instance, because Card Case can notify a coffee shop when you walk in the door -- and because the cashier can see your profile, and can see that you usually get a medium mocha and a croissant -- the barista can get your drink started for you while you’re standing in line.<p>If a restaurant's going to go to all the trouble to install a system like this and set it up so that my phone can pay them, why couldn't I just order on the phone? Then I wouldn't have to stand in line at all, and they won't have wasted their time if it turns out that I want something else instead of what I usually get.

&#60;token dude posting about privacy issues&#62;<p>This is amazing in terms of ease-of-use. However, the privacy implications are a bit worrying...<p>I don't really want to rubbish this, I hate the naysayers when something disruptive comes around (note that Japan rolled out pay-by-cellphone on their subway systems something like 10 years ago) but...<p>"She saw my name and photo on her iPad, tapped it, and I was done. A receipt was sent to my phone."<p>So all employees at stores using Card Case can see the name, identity and photo of <i>every single person</i> using card case within a <i>100 foot radius of the store</i>. Completely regardless of whether they want to buy something or enter the store. What if you don't want random stores to know when you walk past? What if your abusive ex-husband is working at a store and sees your name come up on the list.. etc.<p>Additionally, if you use the app, Square knows exactly where you are at all times. I'm not at all comfortable with that. Apple had a massive scandal when it was revealed that it's technically possible to retrieve location history from iOS. This is legit human tracking - police and three letter agencies everywhere are probably throwing parties right now.<p>HN was up in arms when retail giant Westfield was tracking number plates entering their car park. Just number plates.<p>&#60;/token dude posting about privacy issues&#62;

A malicious cashier could order things in your name, whenever you were nearby.<p>This might not happen much in practice, because the cashier would be found out later (assuming they must login). However, the opportunity doesn't arise with existing transactions, where you must physically hand something over (cash/card), and usually get an opportunity to verify the amount, so there's no evidence either way. It will be interesting to see if this is actually a real issue, in practice, in the current roll-out.<p>Many, many cash-alternatives have been tried and failed, but this one has a new technology (iPhone geofencing) and smart founders. If it does work, they could quickly revolutionize cash - globally (not to mention be <i>the</i> killer-app for the iPhone).

What I find the most fascinating is that the same company is running both the seller and buyer sides of the transaction. Without middlemen, they have a lot of flexibility to determine how the transaction should occur. Right now credit cards rely upon a fairly complex system of gateways and processing and so it's really complex and difficult to change the process.<p>I wonder if a security feature they could add would a two-factor authentication where your phone would display a one-time use auth code that you'd give to the cashier to approve the transaction, for those that are worried about automatic billing.

This does look interesting, but TBH, I don't think its the end of credit cards per-se. One main reason:<p>What if my phone's battery is dead ? Does that mean I can't buy anything ? What happens in an emergency ? Credit cards are easy as they're quite low tech physically (a magnetic strip, a chip and some plastic).<p>Other things would be stuff like: not everyone has a phone, but would still like a credit card, etc. There are countries where phone penetration (and not even smart phone) is not very high, but the population still need to have credit cards.<p>Granted, I can see it being used as an alternative, but doubt it will be the "end of credit cards"

If this works, Square will join the narrow ranks of companies who I want to succeed because my life would be dramatically worse without them.<p>Please let it work.

I am the cofounder of a startup that builds an iOS/iPod/iPad POS Ambur, and it's absolutely astonishing to me to see people claim Square is doing anything useful for merchants.<p>Their software is far too simplistic for anyone running more than a very basic coffee shop with tech savvy customers to use. Even something as simple as most customers <i>demand</i> paper receipts, and Square's functionality is taking basic orders, one a time, with no conception of any business analysis functions. That does not cut it for any business bigger than a small coffee or retail shop, where customers pay and are served instantaneously. no matter how cheap Square is, or how many brilliant designers they hire, they're not going to get into businesses bigger than this without expanding what they're doing.<p>They really, really, need to launch a platform for people like us to innovate on. We're young, forward-thinking, and as an ex-restaurant employee I know how much CC companies and traditional POS companies screw businesses. <p>We're trying to change that on the POS side, and I desperately wish Square would be less egotistical and let us use them to change the payment side. It would be tremendous for them, because it lets POS companies solve adoption for them, instead of them trying to engineer 1000 solutions for 1000 different types of business, and let's them focus on their core compotency - beautifully designed software for consumers.

But I heard that Square was totally irrelevant because they were only "innovating" based on the outdated paradigm of the credit card system.<p>/sarcasm<p>Don't confuse where a startup is today with where they're headed. Sometimes you have to tack against the wind to get to where you ultimately want to end up. The best startups are those that can make money while also setting up for a huge play that no one else is positioned to pull off.

Very cool.<p>This also brings with it a new source of analytics and marketing opportunities (for better or worse?).<p>A coffee shop cashier could be told (through product suggestions on the iPad they use) that you've missed your regular lunch up the street and to offer you something to eat.<p>Online ads could now be targeted towards you further, based off what you purchased in the real world (that coffee and muffin) because the purchase was matched to you, and your iOS Device ID.<p>A new round of marketing is possible by tying in real world/daily purchases and being able to push that information back to retailers (in the form of product recommendations or analytics for them), as well as advertisers.

Is this really the end of the credit card? It sounds like an abstraction layer for payments. The backing money used to pay will still be some sort of payment source like a credit card or debitable bank account.

I like the idea, minus the client tracking feature. I hope that they will add a opt-out for clients who don't want to be tracked (so basically every time you walk into a store, you are like a brand new customer, system-wise).<p>Also, I have some doubts about the human face recognition bit. Will it work in a crowded environment, with stressed-out clerks? Phones get stolen all the time and it doesn't sound too remote that someone picks your phone and walks into a shop with a big pair of shades and a 4 days beard.

My questions regarding Card Case:<p>1) How is it going to move away from being based on credit cards?<p>Most savvy people I know use credit cards wherever possible because of the no-liability fraud protections that are not present in debit transactions. Clearly, Square users are younger and savvier than the general population. No way should anyone use bank account-based payments on a mobile device that could be stolen/hacked/lost because you're not going to get the money back that is fradulently charged.<p>2) Do you really want to have a shopping experience where store cashiers and other customers standing around know your name?<p>Most people I know would prefer to remain more anonymous than that.<p>3) Where is the verification of customer payment (e.g. signature on CC receipt)? What happens when there are customer chargebacks?<p>4) Is it really that hard to pull out and use a credit card?<p>I'm all for improving the current payments environment where a few major companies (Visa, MC, AMEX) dominate and as such, are able to extract large fees from merchants (which get passed along to consumers), but I don't see Square (or anyone else) as having found the answer yet. Their attempts seem to be more "cool to have" and technologically impressive than actually solving the underlying inefficiencies in the payments industry.<p>And frankly, the major credit card companies are going to come out with their own NFC apps at some point and if Square is still relevant, they'll be just another player in the oligopoly (but still dependent on the others' back-end processing component).

The Square dongle is the most brilliant customer acquisition tool in the history of marketing to small businesses. But Square probably needs to also offer a swiping solution that makes more sense in a permanent location like a physical store. And it should also acknowledge that customers are going to ask for a paper receipt for some period of time. Not every retailer is Apple.<p>Getting rid of the flat fee that traditionally accompanies credit card transactions was also a smart move to further open up new credit card processing markets.<p>The Card Case? I'm not sold in its current state. This article, like pretty much every article describing the latest "wouldn't it be great" payment product story, describes a process that sounds quite a bit worse than a simple swipe of a 2mm thick plastic card.

My problem with all of these systems is the same: I'm disorganized, I forget to charge my phone or bring it along, and so the chances of me having a fully charged, working, switched-on phone with me when I want to buy something are far lower than my chances of having a wallet.

So, this is cool, but...<p>Why do you have to have a smartphone to do this? If you're going to get businesses on board and use photo IDs to verify every transaction, why not just have the signup process be a webcam and a form?<p>There's a couple of cool usability things you can do with a smartphone (proximity pushes users that are there to the top of the list in case of name conflicts, whether it's from geofencing, manual inputs, or side-channel geo info), but the basic idea of registering for a store doesn't seem that novel. Why not slap a decent search UI on it and give all the cashiers iPads?<p>Is this idea so novel that nobody thought you could look up a name and photo via the web at point of sale before today? And if the idea isn't novel, why hasn't anybody successfully executed it?

This reminds me of "The Future of eBusiness" from 1999 <a href="http://www.youtube.com/watch?v=xnwaFxFru5k" rel="nofollow">http://www.youtube.com/watch?v=xnwaFxFru5k</a> Funny it took so long to get here, and that Square beat IBM to market :)

It's ironic to see this article coming from Farhad Manjoo.<p>I wrote a response to his original piece a while ago:<p><a href="http://www.aarongreenspan.com/writing/essay.html?id=51" rel="nofollow">http://www.aarongreenspan.com/writing/essay.html?id=51</a><p>What Square has done with card case is pretty slick, but at present it doesn't scale. Paying with your name doesn't work at Wal-mart. And funding with your plastic credit or debit card doesn't work especially well for most coffee shops or other small businesses that want to save on interchange fees, not pay more of them.<p>I look forward to competing with Square again when I get my California license.

It's also pretty interesting to see them build a whole new payment system using normal everyday tech like smartphones and tablets (plus of course remote servers). No expensive custom mainframes and ancient software. The trick now will be to get as many businesses to use it (preferably all of them and preferably worldwide).<p>I also think using photos is one of the most surefire ways of identifying the buyer, as well - it had a nice effect on credit cards (with photos on them, you can't just steal one and use it for whatever) and it can definitely help curb fraudulent purchases with Card Case.

Card case is elegant and innovative. As a user, I love it. However, calling this a harbinger of end of credit cards is jumping the gun. If that would have been easy, PayPal would have already ended credit cards (for online purchases). I see no signs of that.<p>A completely different set of competency and technology will be required to replace the credit cards with their own payment solution (credit risk assessment, fraud prevention etc). Their impressive track record so far means they can certainly develop these; but it won't be that quick or easy.

Almost 100 comments, and no one mentions Bitcoin. I'm surprised.<p>Seems to me this same app could be built for Bitcoin, and you could eliminate or reduce the 2.75% service fee. Or you could make it 1% and give it back to the purchaser in the form of points (like credit cards).<p>Bitcoins could be instantly converted to cash, for a fraction of that fee (about 0.6% using a Bitcoin exchange).

When I turned 16 and was excited to drive everywhere, I would volunteer to pick up groceries for the house. My dad would give me his credit card so I could purchase the groceries.<p>How would a similar scenario play out in the Card Case universe? I wasn't allowed to have my own credit card until college and I would never use my debit card for common house purchases.

So every time I buy something I end up declaring to every-one in the shop that I have my smartphone on me, not only that but I publicly tell them everything they need to buy stuff from that shop if they did manage to get my phone?<p>Chip-and-pin means I rarely carry cash, I don't really see this as an improvement on putting my card in a reader and entering my pin.

I have to admit when Square first came out I didn't see what the big deal was. A little doohickey to plug into your iPhone to swipe cards - sure, sounds useful for certain merchants, but not something world-changing.<p>It's cool to see that there's a larger plan unfolding. Credit card networks are tough nuts to crack and it looks like they've found a way. Kudos.

On the other hand:<p>- anyone in the room knowing your name can get free cookies (or anything else) - signal travel through air, so physical hack is not necessary anymore - its still tied to your phone ;-)<p>the rest is pretty cool, but i'd like to confirm manually each transaction thank you very much. I want to keep control of MY stuff, my money, my phone. My my my.

Hmm, perhaps I need to find the time to become an Apple Developer and sign the NDA, for much the same reason that folks who want to write screenplays move to Hollywood: To find out what the industry is going to do, years in advance.<p>Geofencing is a big deal and I first heard of it... today. How long have iOS devs known? Since WWDC?

What happens when the merchant doesn't care he's paid by the right customer?<p>How does the system handle the common use-case where you give a third party (wife,friend,kid,..) the money to go and pay the bill.<p>Both Facecash and now Square Card Case have this problem, but maybe I have missed something.

Sounds interesting. But also a bit risky compared to a credit card, which to me isn't a hassle to use.<p>And does it offer reward points?<p>If not I'll stick with plastic.

What happens when your chilling in a coffee shop and your arch nemesis orders a latte with your name?

I am looking forward to the IPO. I expect big things from Square.<p>They are really kicking butt.

I use card case at one of our local coffee shops in SLO. It's pretty slick.

What prevents competitors from creating their own app that does this? If this takes off and Square charges X percent, I assume that Competitor Y will develop a similar app and charge X-z percent. I'm having a hard time seeing the barriers to entry for this particular approach.

Not that this isn't neat, but regarding the opening:<p><i>Wait a second: Why is this supposed to be any better than pulling out a credit card? It’s not faster, it’s not more convenient, and it’s not any safer.</i><p>Yes it is. Just having an RFID card + POS reader is awesome. Putting the chip into a phone <i>is</i> even more awesome. If you don't believe me, move to Japan for a few months and live the dream. ;-)

Are there really people that walk around with their phone GPS switched on all day? Security concerns aside, what a drain on battery life that must be.

Jack Dorsey is going to be one of the biggest innovators of our time. 2 huge companies already in his belt

I just bought buffalo wings from next door using LevelUp on my phone. It's fantastic how they offer that service, you'd never expect it because they're a little pizza shop. LevelUp uses QR codes and you can quickly scan it. They have this phone-looking thing set up with the camera facing out, and you just hold your phone in front of it to pay.