The End of Cash – Not Quite
Jack Dorsey, the 35-year-old entrepreneur widely known as the creator of Twitter and founder of Square, appeared on a Sunday morning news program to announce the introduction of Square Wallet. The concept behind Square is brilliant and simple. A lemon aid stand, landscaper, or wandering volunteer at the hospital ball selling tickets for a drawing, can all accept credit cards. The tiny Square credit card reader is free and fits neatly in the 3.5 mm headphone jack of an iPhone, iPad, or Android device. After a swipe of the card, the buyer uses their finger to sign an invoice that appears on the screen of the device, and after confirmation, an email receipt is sent to the buyer. The seller gets their money the next day minus a transaction fee of 2.75%. There are no setup fees and the seller gets comprehensive electronic reports about how their business is doing. The new announcement on Sunday morning was that you can now buy gift cards for friends and family that are stored in your Square Wallet for use at any merchant that accepts Square payments. I was enthusiastic about the announcement and immediately installed the Square Wallet on my iPhone 5. I then bought myself a Starbucks gift card for $20. An email arrived in my inbox saying that I had received the gift card and I was offered three options for what to do with the card after I clicked on the email to accept it. Option one was to save the gift card in the Square Wallet, option two was to place the gift card in my iPhone Passbook, and the last option was to print the gift card. In all three cases, the merchant simply scans the now ubiquitous QR code on the gift card. The merchant receives their payment from your gift card or, if you have no gift card, the payment will come from the credit card you connect to your Square Wallet at the time you install the app.
When you open your Square Wallet, a list of merchants near you appears in sequence by the distance from where you are. I couldn’t wait to try the new electronic money, so I headed out to Starbucks this morning. The company had announced last month that 7,000 of it’s locations accept Square payments. Surely the one here in Connecticut would. When I got within a mile of the store, my wallet indicated that I could make a payment. The Square Wallet has a hands-free payment option that you can activate. When you get to the merchant, you simply tell the cashier your name. Your name and picture then appears on their screen and, assuming they are satisfied it is really you, your payment is accepted – hands-free. Brilliant! I ordered a café misto and presented my iPhone with the gift card appearing. The cashier pointed to the scanner on the counter and I placed the iPhone a couple of inches away. Nothing happened. I then tried the passbook gift card that I had purchased. Nothing happened. The cashier called the manager to the counter, who immediately said, “oh, that won’t be operating until July, 2013”. She was not the least bit apologetic. I can’t wait for the new technology, but I guess she can. I don’t know the readiness of the millions of other potential sellers who will accept Square payments. With 180 million credit card holders in the United States, the introduction of the Apple Passbook and the Square Wallet have the potential to change the way buyers and sellers think of “money”. The largest banks and telecommunications companies have been working on e-money for years. Although the announcement by Mr. Dorsey may have been a bit premature, at least with regard to Starbucks in my neighborhood, it reminds me of how iTunes upstaged the giant music companies and how Amazon is upstaging book publishers. The cable and movie distribution companies are facing the same kind of disintermediation. Internet companies don’t have the legacy and baggage and complex legal infrastructures of the giants, and therefore they seem to be able to move much more quickly with the introduction of breakthrough ideas. For me, the next step is to see if I can find a merchant other than Starbucks where I can spend the two gift cards I bought for myself.