I Thought Square Would Kill the Credit Card. Will the Company Save It Instead?

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May 14 2013 5:48 PM

Plastic Surgery

I thought Square would kill off the credit card. Will Jack Dorsey’s company save it instead?

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A couple of years after its launch, though, there’s one big problem with Square Wallet: Almost no one is using it. I’ve tested it at a few places in San Francisco, and Square says it’s also got adherents in New York and other big cities. But many merchants who use Square haven’t turned on the ability to pay with your name, and most of those stores’ frequent shoppers don’t know that it even exists. “We are always building and leading toward a better experience, and Square Wallet is our better experience,” Dorsey said at today’s event. “We want to see it flourish. But we still have a lot of work to do.”

Translation: Credit cards will be here for a good long time. This isn’t a novel admission; Dorsey has always said that he doesn’t think plastic will go away anytime soon. But the launch of the Square Stand—a device engineered to improve the credit card experience—shows how deeply Square is betting on credit cards. It’s as if, after building the Model T, Henry Ford also spent a lot of money to build a faster horse, just to hedge his bets. In this way, Square Stand prompts a deeper question: What if, as wonderful as Square Wallet is, we just never move beyond credit cards? What if people find faster horses good enough?

After all, credit cards are pretty good. They’re more convenient than cash and checks, they’re smaller and cheaper than your phone, they rely on infrastructure that’s ubiquitous, and they’re pretty secure. Sure, they sometimes fail—the guy at the pizza shop filches the number you read to him over the phone—but they’re so well-insured by the credit card industry that you have no qualms giving out your number to the next pizza shop you call. The only long-standing problem with credit cards is that they require real-time bank approval to use, and—especially for small businesses—they’re more costly to process than cash. But Square solved those problems. Its reader let businesses accept credit cards anywhere they had a data connection, and its low, transparent prices made it affordable to do so. After that, what was there to not love about credit cards?

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Well, Dorsey, like all perfectionists, can think of several things. You’ve still got to take something out of your pocket and hand it over. You’ve still got to sign—an awkward, inelegant gesture that adds unnecessary friction to some transactions. (It doesn’t make much sense that, in a restaurant, you have to wait for the waiter to pick up your card and ring it up, just so he can bring it back to you for your tip and signature.) Worst of all, the whole process is impersonal. As he told me last year, the act of opening up your wallet, finding your card, handing it over, and signing creates a kind of psychic overhead—it makes you “feel bad.” If we made money invisible, we’d all feel better when we shopped.

I agree with him. Paying with Square—paying with nothing—is better than paying with something. But I also suspect that for a lot of people, that psychic baggage isn’t such a big deal. Credit cards just work. They’re fast, they’re easy to understand, and they’re everywhere. Sure, we could make payments work better, but why should we when everyone really seems to like plastic? In this case, a faster horse might just be good enough.

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