The End of Cash? New iPhone Apps Take Credit Cards

By Eva Norlyk Smith, Ph.D.

The race is on, or so it seems, to come up with the best mobile phone device for swiping and processing credit cards. Mophie, a manufacturer of accessories for the iPhone and iTouch, has announced that it will introduce a new add-on credit card reader, which enables small businesses to swipe and process credit cards on the spot.

The Mophie reader works through a small device attached to the audio jack of the iPhone or iTouch. The transaction is processed through a special third party application. Mophie is presenting the new device at this month’s Consumer Electronics Show in Las Vegas.

The Mophie announcement comes at the heels of the beta release of Square, Twitter founder Jack Dorsey’s much publicized bid on a portable credit card reader, also to be attached to first the iPhone and iTouch, and eventually to all types of smart phones. In addition, later this month, industry giant Verifone Holdings will start shipping a new device called PayWare Mobile, which will enable small businesses to turn mobile phones into credit card readers.

The new credit card readers have been made possible by the increasing popularity of smart phones, which allow consumers to hook up to the Internet and which, despite their minute size, are able run sophisticated software programs for pretty much anything, including processing credit cards.

The new smart phone devices like Square or Mophie’s card reader may eventually replace more expensive point-of-sale wireless credit card terminals currently used by small businesses. More than that, however, they could eventually increasingly replace cash as the way consumers not only make payments, but take payments.

At least, that is the ambition of the credit card processing add-on developed by Square. For all their fancy technology, most wireless credit card processing devices can still only be used by small businesses with a merchant account. According to Square-founder Dorsey, Square users will be able to swipe credit cards and process transactions via their smart phone without having to go through the cumbersome and expensive process of signing up for and maintaining a merchant account.

Square aims to level the playing field and enable both smaller businesses and individuals to piggyback onto its own merchant account, removing the limitations of expense and logistics, which currently make it impossible for consumers to process credit card sales.

If Square’s iPhone app – or something similar to it - catches on, consumers could eventually be using smart phone apps to accept payment by credit cards when holding a yard sale or buying a couch on Craigslist, bringing us yet one step closer to the end of cash.

Before that, however, the founders of Square and other mobile payment readers will have quite a few logistics to sort out. Critics argue that the idea of making it possible for consumers to take credit cards without having a merchant account of their own is little but a pipeline dream. Still, at one point in time, so was the iPhone, the Internet, personal computers, and all of the numerous other gadgets and software apps, which over just a couple of decades have transformed much of how we live our life.

Published: January 7, 2010