The Magic Dongle

Suddenly, the traditional payments industry seems torpidly slow. I'm talking about Square, the Jack Dorsey company that gives away these little square "dongles" that plug into the headphone jack on smart phones and allow merchants to take swiped payments. You know, payments on a stick.

Apparently the devices are taking off with small merchants. You sign up online, get a dongle mailed to you, you plug it in and start taking card payments. Easier than dealing with salesman, contracts, all that cumbersome hardware.

Now, I've heard Square has a compatibility problem with the iPhone 4. I have also heard that some data security issues still have to be worked out. And Square does not as yet support paper receipts. But, still, Square seems to be gaining popularity. It's small, clever, and easy. So why did it take a payments "outsider," the Twitter guy, to think it up?

I don't think Square is revolutionary. Payments guys have come up with "sleeves" that attach to mobile phones that allow cards to be swiped. There are these clunky handheld devices that take swiped payments. There are even simple pocket swipe devices that allow you only to swipe the card and do absolutely nothing else. And yet no payments company thought up the magic dongle.

Jack Dorsey doesn't look like a payments guy and it seems he doesn't think like one either. Is that why some in the industry don't like him?

Hold on to your envy and do things the way you've always done them and find one day soon that the traditional payment terminal is as antiquated as the rotary phone.

Ubiquity

"Ubiquity" is a popular word in payments. It is an especially relevant term for mobile payments, where ubiquity means that all brick-and-mortar merchants in the U.S. have point of sale terminals configured to accept payments via smart phones. It means that when consumers come into stores, they can make purchases just by tapping the phones on the terminals.

But if the ability for all merchants to accept mobile payments is not there, then it diminishes the convenience factor for consumers. If a shopper wants to pay for groceries with a smart phone, but the merchant's terminal is not set up for it, then the shopper gets frustrated, puts the phone away, and returns to a payment card or cash for that purchase. Maybe next time the shopper wants to pay using a smart phone but thinks better of it because of that negative past experience.

Therefore, to encourage consumers to use mobile phones to make in-store purchases, the ability to accept smart phone payments must be everywhere. Imagine a time when smart phone-enabled terminals are as ubiquitous as Lady Gaga...Ah, what a thought!