Square Inc. is making its smartphone magnetic stripe card reader available through Apple Inc.’s stores and website, but the move has left one observer unimpressed.
“I have to approach Square with some level of caution and skepticism,” says Gil Luria, a research analyst at Wedbush Securities Inc., a Los Angeles-based equity research firm.
Many vendors sell their wares through Cupertino, Calif.-based Apple, including such established payments-industry vendors as VeriFone Systems Inc. and Intuit Inc., Luria says. So the deal between Square and Apple does not represent a breakthrough for the start-up, he contends.
Moreover, San Francisco-based Square’s product is inferior to what VeriFone and Intuit offer because the Square reader lacks a layer of transaction security, Luria says.
San Jose, Calif.-based VeriFone has proven itself a strong terminal maker, while Mountain View, Calif.-based Intuit has established itself as a viable processor, he notes.
Besides offering a reader with technology not much different from its competitors, Square has a questionable model that assumes a great deal of transaction risk, Luria says.
“The allure and the interest is mostly because of who the founder is,” he says of Square, whose CEO Jack Dorsey started San Francisco-based Twitter Inc., the social-networking site.
Square offers its reader at no charge. Though Apple is charging $9.95, users receive a $10 refund once they activate their account, according to published reports.
The Apple site describes Square as “a revolutionary service that allows you to accept credit cards, using a reader that plugs into your iPod touch (4th generation), iPhone 4, or iPad along with a free easy-to-use app.”
“There's no need for complicated contracts, monthly fees or merchant accounts,” the Apple site says. “All you pay is 2.75% per transaction.”
Square officials declined to comment or make an executive available for an interview.
