Square Payments System Gets a Free Hardware Boost

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Square—that plastic gizmo that plugs into your iPhone and reads magnetic stripes—may, or may not, revolutionize the credit-card system. Inventor Jack Dorsey has, however, removed one big barrier to success: He wants to give it away.

Dorsey was speaking to CNBC journalists at the Le Web conference in Paris when he plainly responded "We're going to try to give these away for free" in response to a question about pricing.

It'll involve some business model juggling, of course, as Dorsey went on to note: "we're trying to get costs down significantly." Considering that the hardware must consist at least of the plastic housing, the magnetic reader, and some basic electronics to amplify the reader signal and send it in to the iPhone—bits that are all cheap—it should be possible for Dorsey to achieve his goal.

The point of this move is to make the whole thing more attractive to potential users by lowering the barriers to adopting it as their main electronic payments system. Free is, of course, an attractive word. It also seems that the costs of running Square will be very low or free, which sweetens the deal too. And for Dorsey, free is clearly something of a watchword: As co-inventor of Twitter, he must have played a big role in deciding Twitter would be an open system that's so far unencumbered by advertising.

There's just one snag, and it's the same one I noted before, only worse now: In Europe, we mainly use chip-and-PIN cards for credit and debit banking. The magnetic stripe is fast on its way out, and may even be banned. If Square is to make any headway over the other side of the Atlantic, it'll have to have chip-reading and decoding/encoding electronics inside, which will seriously mess with Dorsey's plans to give the hardware away for free.

[Via Venturebeat]

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