Swipe Credit Cards On Your Phone: Twitter Co-Founder Launches Square

Twitter co-founder Jack Dorsey this week is launching Square, a new product that enables mobile devices to scan credit cards. Depending on how fast Square is made available for different mobile platforms -- right now, its software works only on the Apple iPod and iPod Touch -- it could be a disruptive, low-cost alternative to expensive point-of-sale (POS) credit card devices.

Square is a small unit about the size of a postage stamp that plugs into the headphone jack of various smartphones, media players and computers. Users swipe their cards into the device, and then sign for the transaction by touching the mobile device's touch screen. Users can opt for an e-mail or SMS text with a link to the transaction receipt, too.

According to Square's launch Web site Squareup.com, Square will not store credit card information, and registered users can also submit photos that would flash on a mobile device to confirm their identities. Square can also provide information to users on whether they're a repeat customer at a particular businesses, and further gives users the option to donate a penny from every transaction to a chosen charity.

Square was conceived earlier this year by Dorsey and a friend, Jim McKelvey. The initial inspiration, as described by Squareup.com, came from McKelvey, who couldn't easily accept credit card payments for his glass artwork and was losing sales as a result.

Squareup.com provides additional details for sign-up, although Dorsey and his team have not yet disclosed what, if any, fees they'll charge or if they get a cut from credit card transactions made through Square. According to an interview with Dorsey in The Los Angeles Times, Dorsey plans to give away free Squares to anyone who signs up for a Square account.

More than one observer Wednesday immediately noticed Square's potential as a disruptive technology in the POS space.

"Verifone makes a $900 wireless credit-card terminal vs. Square, which runs on a $299 iPod touch. I rest my case," wrote tech blogger Om Malik on GigaOm.

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