Twitter Founder Unveils Ambitious Mobile Payment Device

SAN FRANCISCO/NEW YORK/ST.LOUIS—Twitter co-founder Jack Dorsey has launched a new start-up company whose ambitions are every bit as grand as those of Twitter (whatever those might be). The company’s name is Square, and it currently aims to excel at one thing—facilitating and simplifying the processing of credit card payments between merchants and customers using either an iPhone or iPod Touch.

“Today the Square team is focused on bringing immediacy, transparency, and approachability to the world of payments: an inherently social interaction each of us participates in daily,” Square explains on its website. “We’re starting with a limited beta and rolling out to everyone in early 2010.”

While that might not sound particularly revolutionary, if successful—meaning, if people use it—Square could in fact radically change the way business and people transact with one another. It also allows people to easily transact with one another without having to set up for fee-laden accounts with services such as PayPal.

According to PC World’s Tony Bradley, Square’s success will hinge on its promise to do away with financial middlemen.

“What sets Square apart from [other credit card processing] apps is that it provides users with a small—well ... square—gadget that can read the magnetic stripe information from credit cards,” he wrote in a column Wednesday. “The credit card data read from the magnetic stripe is not stored on the iPhone at any point. The magnetic data is converted to audio and input through the headphone jack, where it is encrypted and transmitted to Square for processing.”

Purchasers sign for their goods or services on the iPhone touch screen, with receipts sent instantly to either an email account or a mobile phone, where they can be securely accessed.

“The credit card data is never actually seen or retained in any way by the merchant or the Square-enabled device,” reports Bradley, “and even the email or SMS address is not shared with the merchant. Users can also associate a photo with their Square profile to prevent identity theft. The entire process seems relatively safe and secure.”

Of even greater significance to retailers, there is no need for merchants to have a merchant account in order to accept payments using Square, an evolution in transacting that could save a lot of money in subscription and other fees for both online and brick-and-mortar businesses.

For Bradley, a successful Square not only holds the promise of leveling the playing field for small and medium businesses but also augurs a new way for people to exchange funds without having to pay for the privilege.

“Anyone can set up an account and use Square to transact money,” he writes. “Does your cousin owe you $50 for the ticket to the Houston Texans game? Just whip out the iPhone and have him pay up.”

TechCrunch actually spent a day with Dorsey, putting Square through its paces at a San Francisco coffee shop. Video of the encounter is here.

The Square website is here.