It was inevitable really that @Square would have come out with an EMV capable card reader sooner or later. Turns out it was sooner. Yesterday in fact. And in doing so, they answered a lot of lingering questions I had. Notably, how do you move from a business model built around distributing m-POS readers for free to one where the end user would have to pay for the device?

My expectation was that the US would follow Europe with PIN pad readers that tether to mobile devices via Bluetooth. This would be quite a shock to the business model since these EU readers retail at around $99 per device. For the US small business that has grown accustomed to free(ish) card readers, this might well push them away from card transactions altogether. Instead, Square has opted for a halfway house - an EMV reader that is not using PIN.  I asked Square via Twitter if the  reader was PIN capable and they replied... @nickster2407 Hello, Nick. Right now we're focused on the US which is a chip-and-signature market. Actually, it's not. Not yet anyway. This decision to avoid PIN obviously keeps the bill of materials down and although we anticipate that Square can't give these devices away, that the sticker shock for merchants will not be a deal breaker like a comparable PIN pad model. However, it also takes a lead in tipping the US to Chip and Signature (as preferred by Visa) rather than Chip and PIN (as preferred by retailers and the NRF). Just a reminder... Visa was part of the Series B investment of Square in 2011 to the tune of US$27.5 million.

While I think the decision for a Chip and Signature approach is more to do with maintaining the existing business model, it's not difficult to connect the dots in terms of Visa's chosen path for EMV and the devices that seed the market. EMV PIN isn't dead, but this may precipitate a different course for US payment card security, further prolonging the bifurcation of the US vs. Rest Of The World.


About Nick Holland

Nick Holland leads JAVELIN’s Mobile practice area, working with clients to gain strategic insights into mobile trends. He oversees and tracks mobile banking initiatives, mobile infrastructure to support mobile banking, mobile marketing and mobile imaging trends.

Before joining Javelin, Nick worked at Mercator Advisory Group, Pyramid Research, Aite Group and most recently with Yankee Group heading their Mobile Money Strategies practice.

He has spoken and chaired a variety of conferences and events, including GSMA Mobile World Congress, Rutberg Wireless Innovators, Money2020, SXSW and 4GWorld and has appeared in publications and shows including The Wall Street Journal, CNN Money, NPR's "Marketplace", Forbes, Fortune, Business Week, Time Magazine, The Economist and the Financial Times.

Nick holds an MSc. degree with Distinction in Information Systems Management from the University of Stirling, Scotland (Master’s Thesis in 2001 was on Bluetooth as a payment technology), and a B.A. Honors degree in Art and Design History from De Montfort University in England.


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