"Merchant payment processing is one incredibly fragmented market, despite years of consolidation. Square will have to bet on achieving profitability that can only come if they achieve scale," he says. "And that means digging deep into their founder's [Jack Dorsey's] war chest."
The hardware might be valuable to smaller merchants — "not only simplifying payment options but also bringing in advanced technology," he adds.
"Makes you wonder if and when Square will launch a significant foray into mobile POS payments that benefits consumer, merchant and bank."
Still, Square is infamous for its good PR. And, while this announcement surely is a stab at solving some of its real business problems, it has elements that appear to be more sizzle than steak, says Rakesh Agrawal, a consultant on mobile payments and marketing.
"It just seems like a hack," he says. "I don't see it as being meaningful to their business. They don't really have a business channel for this."
He adds that Square's retail relationships with Starbucks (SBUX) and others to distribute its dongles don't necessarily mesh with what small business owners want.
"They've tried to sell the Square reader at retail, and I don't know how successful that's been, but still that's not how small businesses go to buy payments services," says Agrawal. "They don't go to Starbucks hoping to pick up payments technology."