Credit cards have served for many years as the convenient alternative to cash. Sometimes, however, we realize we’re going to need cash for a particular outing, in some cases because a small business that doesn’t take credit. Perhaps this reluctance won’t always be the case. A new breed of tech companies led by Square is revolutionizing digital commerce by lowering costs and simplifying transactions. Square, a San Francisco-based startup, has even been described as “Silicon Valley’s next great company.”

So, is Square truly going to change how we pay for things? Will it complement or kill the credit card? Let’s explore the possibilities.

Creating a thinner wallet

Square was founded in 2009 by Jack Dorsey, the creator of Twitter, and Jim McKelvey, a computer science engineer and businessman. In 2010, Square launched as a service that lets businesses accept credit or debit cards on their smartphones or tablet computers. Companies can choose to pay per month or per swipe through the simple pricing model for Square Reader, a small plastic device that plugs into the audio jack of an Android or iOS device. Business owners can get a free reader or download a free app that links to their bank account.

Here’s the coolest part. Square has created several products that appeal not only to merchants but to consumers as well. Square Wallet is a free app that links to your credit or debit card and gives you hands-free checkout – just say your name to pay for something. Wallet also allows you to explore nearby businesses, collect rewards and share information with friends.

Starbucks: The tipping point?

Easily the best known adopter of Square has been Starbucks. The big-name coffee chain allows you to pay with Square at some 7,000 locations nationwide. Why not just use the Starbucks app to pay? Well, the Starbucks app works like a gift card that needs to be reloaded when you run out of money; but with Square, scanning your phone is the exact same as swiping your debit card. And after you’ve bought your venti mocha latte, you can also search for other nearby vendors that accept Square payments.

Reimagining the Register

Everyone is familiar with the traditional cash register. They’ve been around for decades at our local supermarkets, restaurants and hardware stores. Now, however, merchants have a new alternative from Square that’s equally ambitious as Wallet: Square Stand.

Stand functions as a sleek, customizable point-of-sale system that allows merchants to run their business through their iPad – accepting cash, credit and Square Wallet payments and recording real-time sales data. Priced at $299, Stand holds a merchant’s iPad and seamlessly integrates their point-of-sale accessories. Stand will be available on the Square website, at Best Buy and at other yet-to-be-announced retailers.

Challenges for the disruptor

Despite its disruptive technologies, Square still faces a myriad of competitors. PayPal has launched an iPad payments app called PayPal Here that will compete with Square’s iPad register app. Google also has a virtual wallet product called Google Wallet – and it’s always a mistake to overlook the titan of Mountain View. And then there are the established financial institutions: Bank of America has also taken on the startup with a mobile payments service of its own.

Another challenge relates to technology adoption. Buying coffee at Starbucks is one thing, but has Square truly reached a tipping point to take it past the early adopter stage and into the mainstream? Even if a tipping point has been reached, Square will have no shortage of competitors looking to become the leader in mobile payments – an industry that will only continue to grow as we become increasingly connected to (and reliant on) our smartphones and tablets.

So, have you used Square for your mobile payments, or do you prefer to pay in other ways? We’d love to hear your thoughts on the startup or the mobile payments industry.

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