Square Is Looking Good For Now, But The Future Is Hardly Certain

Square, the mobile payments company started by Twitter co-founder Jack Dorsey, scored a major victory this last week. For those who don’t know, Square gives out credit card readers that plug into the headphone jack on smartphones and tablets. Then merchants can process credit card orders, and Square will take a small percentage of each sale. It works out to be a great deal.

The victory that they won this last week involves Apple. Square readers are now going to be sold in Apple Stores for 10 dollars. Then, the people who buy the readers will be given a 10 dollar credit. Square gives them away for free, because they make their money later on.

Why is this a big deal? So far, Square has distributed itself online. In my own experience, it took over a week and a half to get mine. This new method of distribution is much better though. It is prime real estate in stores around the country, that get millions of visitors every year. These customers also tend to be rather affluent. On top of all of this, when Apple agrees to sell your product, it says something about it. It says: we approve, buy this. It is a seal of approval that is coveted in the consumer electronics industry.

In light of this victory, everyone is overlooking what will happen in a year or two. Currently, Square is a massively disruptive company. The product works, it is simple, and it answers a need. It is also led by a very respected and innovative founder. When you add it all together, it turns out to be the perfect recipe. For now.

In a year or two, most smartphones will have NFC chips in them. This (when combined with a payment terminal) will replace credit cards, and ultimately, the Square card reader. So when everyone is crying out that Square will replace the entire financial system, let’s try to remember the bigger picture here.

Unless Square can get involved in the NFC payments business, it will fail. Who will control the NFC payments business when it starts though? Either the carriers (for Android/Windows Phone 7/WebOS/Blackberry OS) or Apple. These are two groups that are reluctant to give up control to third parties. This could spell trouble for Square.

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