Square vs. NFC: Battle of the Mobile Payment Systems

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Square unveiled new tools on Monday for both merchants and consumers to make transactions with nothing more than smartphones and tablets. As mobile platform vendors and the credit card industry strive to implement NFC (Near Field Communications) payment systems, how does the Square solution stack up?

In either case, the goal is to provide a means for consumers to use their smartphones as a replacement for both cash and credit cards, and enable purchases to be made with a swipe of the device. For businesses, flexible payment systems help employees process transactions more efficiently, and give customers more options for making a purchase.

Square uses iPhone and iPad apps to process transaction payments
Overview of Square

The Square system requires both merchants and consumers to have the appropriate software to complete a transaction. Square Register is an iPad app that retailers can use to process payments, and Card Case is an app that is like a virtual wallet filled with virtual credit cards for authorized Square merchants.

Card Case merges customer loyalty card programs with a payment system. Setting up a Card Case account with a local vendor is like opening up a tab, and any time you shop at the given retailer, the purchases are just added to your tab and payment is processed behind the scenes.

Overview of NFC

NFC, on the other hand, is more of a hardware-based system. Completing a mobile transaction with NFC requires a smartphone equipped with NFC technology, and merchants with the appropriate payment processing hardware to be able to accept and process an NFC payment. Simply waving the NFC smartphone in the general vicinity of the NFC payment terminal will wirelessly communicate the information necessary to complete the transaction.


Because NFC relies on both an NFC-equipped smartphone, and on retailers with NFC-compatible POS terminals, there is little availability of NFC mobile payments today. There are rumors that Apple could seed retailers with compatible NFC terminals if and when it introduces an NFC-compatible iPhone to drive availability.

Square is not much better, though. As of the unveiling by Square, there are only 50 merchants authorized to use the Square Register system, and those 50 businesses are located in only five cities: Los Angeles, New York, St. Louis, San Francisco, and Washington, DC.

Suffice it to say that as of today finding a scenario where you can complete a mobile transaction using a smartphone is a long shot.


NFC looks like a clear winner in this department. Using an NFC smartphone is not that much different than using a credit card--you just wave it instead of swipe it. In fact, there are already many credit and debit cards that are capable of making payments with a wave rather than a swipe as well.

Square has a slightly more convoluted process, and more of a learning curve for merchants and consumers to adapt to. The Card Case app is not publicly available. Consumers must visit an authorized Square merchant and make a credit card purchase, then the merchant can send an email to the consumer with a link to get the app and start using Card Case. Sort of a pain.

The Market

One of the problems with the NFC approach is that users must have NFC-equipped smartphones. While it seems that there will be an increasing number on the horizon, right now there are few options. For those with NFC smartphones, finding an NFC-equipped retailer is equally challenging.

Square is limiting itself by virtue of launching with only 50 merchants in five cities, but--theoretically at least--it's a much more open environment because anyone with an iPhone (and soon Android smartphones) can use Card Case to make purchases from a Square merchant. The number of users with iPhones and Android smartphones is significantly higher than the number of consumers with NFC-equipped smartphones.

The Verdict

For consumers, it seems like it would be easier to just have an NFC smartphone--assuming that merchants get on board and start widely adopting NFC-capable payment terminals. For retailers, the size of the potential pool of consumers makes the Square option a much more attractive alternative.

The verdict is still out, really. NFC payment systems and the Square mobile payments platform both have a similar focus, but take an entirely different approach. Both have benefits, but neither is an ideal solution yet.

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