The Real Reason Square Pulled Its Wallet App
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SQUARE SHIFTS FOCUS AWAY FROM PAYMENTS: In a surprise move, Square yesterday pulled its Square Wallet app from Apple and Google's app stores. Wallet was Square's consumer-facing mobile payments service. It allowed users to make payments at Square merchants simply by checking in through the app, walking up to the register and saying their name (merchants were able to see a photo of the user and their account information on their displays). In place of Wallet, which Square says it will continue to support for existing users, comes Square Order, an app built around ordering ahead from restaurants and cafes. "This new offering is a customer experience that goes above and beyond payments and processing payments," Square spokesperson Semonti Stephens tells us.
That's a dramatic shift in Square's consumer-facing strategy. Square will take an 8% cut of transactions made through the new app, compared to its usual 2.75% rate for merchant payment processing (Square's main products remain its attachable card readers and software that turn merchant smartphones and tablets into registers). The steep fee for Square Order transactions reflects the new app's aim to become a customer referral engine: it will steer new customers to small businesses with in-app advertising, rewards programs, and discounts. "It's turning customers into regulars for businesses," says Square's Semonti. Competitor ordering app Grubhub Seamless charges 10 to 14%, but PayPal, which has offered advance ordering for over a year, does not charge merchants higher fees.
Square's shift illuminates the challenges facing all mobile wallets. The crowded mobile wallet field is plagued by slim margins and slowing adoption rates, on top of the expense of maintaining a complex service for a consumer audience. More broadly, the shift comes amid rumors of Square's difficulties in subsisting on the razor-thin margins provided by its core payments processing business. If the new app is successful, Square Order's higher fees would create a consumer-side revenue stream with more robust margins.
APPLE STORES TO ROLL OUT NEW MOBILE REGISTERS FROM VERIFONE: Apple is deploying new EMV-capable mobile point-of-sale terminals in its stores across the country, 9 to 5 Mac reports. The new system from VeriFone replaces a solution marketed by Infinite Peripherals. The new terminal is a hard case compatible with the iPhone 5 and 5S, and is configured to accept chip-and-PIN card payments under the EMV microchip security standard that's popular in Europe and spreading in the U.S. The new terminals can also accept near-field communications (NFC) payments. As Forbes contributor Gary Allen points out, the move may stoke the rumors of an NFC-capable iPhone 6. But on the other hand, NFC comes standard on nearly all EMV VeriFone terminals.
MESSENGER APP KIK DEBUTS VIRTUAL CURRENCY: Kik Messenger, the mobile instant messaging app with 140 million registered users, has quietly debuted a virtual currency system called "Kik Points," Next Web reports. Kik Points is now in a developer test-drive mode, but it awards points to users for completing certain tasks. Currently, the points are only redeemable for a set of virtual stickers called Hipster Animals.
SETTLEMENT IN U.S. PAYMENT-PROCESSOR DRAGNET: Late last month, a U.S. judge in North Carolina approved a $1.2 million settlement that could serve as a template for other banks and payment processors targeted in Operation Chokepoint. The U.S. Department Of Justice claims that Four Oaks bank reaped $850,000 in fees by allowing an unnamed third-party payment processor in Texas to originate $2.4 billion in debit transactions, ignoring signs that the transactions were fraudulent - allegations that Four Oaks has disputed, and did not admit to as part of the settlement. The federal dragnet, first disclosed in March of 2013, has targeted over 50 banks and payment processors with subpoenas in similar cases, American Banker reports. Electronic Transaction Association CEO Jason Oxman has written that Chokepoint, which was initially targeted at limiting payday lenders' access to the financial system, is "burdensome and costly" for law-abiding businesses.
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