Device allows credit cards charges from smartphones


When Showplace Caffe opened in San Francisco's SoMa district in December, owner Catherine Twardos knew she would need to accept credit cards if her business was going to grow.

"People don't carry cash anymore," Twardos said.

She found what she needed with a one-inch device called Square. With her iPad and a tiny credit card reader, her credit card transactions started rolling in.

"It makes it very easy for anybody to quickly and inexpensively sign up to take the dominant form of payment which are these plastic cards that everyone carries," Sqaure co-founder Jim McKelvey said.

McKelvey is an artist who struggled to find affordable ways to accept credit card payments. He was talking on his smartphone when he realized the answer was right in his hand. He turned to Twitter creator Jack Dorsey for help. Within three weeks they came up with Square.

Since it debuted last October, Square has processed millions of dollars a week in transactions and has attracted more than 100,000 new users a day, partly because it is easy to use.

Square works with the iPhone, iPad and Android. Unlike big credit card processing companies, Square does not charge service fees. The credit card readers are free. In exchange, the company takes 2.75 percent of each transaction and deposits the rest directly into the user's bank account.

By comparison, PayPal charges up to 2.9 percent per transaction and some banks charge as much as 15 percent.

Numbers like those make Square enticing to small businesses that often cannot afford credit card transactions.

Catherine Hughes turned a family recipe for toffee into a business. With the help of Ellin Purdom, they built a gourmet business from the ground up selling their goods at events and online.

"We were at events and having to manually input numbers when we got home at night, where as with the square it was an instant processing of the credit card,' Hughes said.

With Square, credit cards are processed immediately and there is no paper trail of credit card numbers.

"Before we were writing people credit card numbers down on a piece of paper," Purdom said.

Square points out that all transactions are protected by credit cards agreements and, as an added security measure, it built in a photo feature. Vendors can snap a photo of the customer with the item as proof of purchase.

"It's a huge hit, you know everyone loves to use it, it's a huge conversation piece and it makes it easier," Twardos said.

Twardos says half of her sales are on the Square reader.

Written and produced by Ken Miguel

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