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Credit Card Processing Apps for Masses

When Ben Ducklow recently paid back $125 his sister-in-law had lent him, he did it in a way that would have seemed unthinkable for average individuals just a few years ago.

He used plastic.

The Carver, Minn., man pulled out his credit card and, using a card-swiping device attached to his relative's iPhone, settled up within minutes. The money was promptly deposited in her bank account, minus a small transaction fee.

The two were using Square, which is among a new breed of financial services that are bringing credit card processing to the masses. Square, based in San Francisco, is piggybacking on the profusion of mobile computing devices -- such as iPhones, iPads and Android smartphones -- that are morphing into financial-transaction hubs for average consumers.

Take a payment. Make a payment. Phones and tablets are increasingly making this possible in ways that are simple, elegant and affordable.

'Bumping' is one way to do this.

Those who use the PayPal service for making or taking payments can avail themselves of a Bump smartphone app to consummate a device-to-device financial transaction with a brief bumping motion, which allows the gadgets to exchange the necessary information.

Scannable codes are another emerging method for making payments.

At Twin Cities-area Starbucks coffee shops, for instance, iPhone users can pay for macchiattos by scanning a square-shaped "QR code" at the store with their devices' digital cameras instead of having to pull out their credit cards.

A bleeding-edge technology called "Near Field Communication" also could be a crucial part of future phone-centric financial transactions. The short-range wireless technology is not widely used in this country yet, but is seen as a way to transform phones into electronic replacements for credit cards. NFR already is built into one prominent smartphone, Google's Nexus S model.

Square, however, seems to be having the most impact on payments in the age of the pocket computer here. Square's success -- the company has said it's processing more than $1 million in transactions per day -- is spawning competitors like Intuit's GoPayment and VeriPhone's PayWare Mobile.

A brainchild of Twitter co-founder Jack Dorsey, Square is the height of simplicity. It's found online at squareup.com.

Users create Square accounts at no cost, associate these with bank accounts, and get Square card swipers free. These plug into the audio jacks of Apple or Android mobile devices. Once a Square app is installed, users are able to take credit-card payments with just a swipe, a few taps and a fingertip-drawn signature on the screen.

That's how Scott Nedrelow, a Minneapolis maker of cases and sleeves for iPads and MacBook Air laptops, processes payments from customers who wander into his studio.

Dorsey once bought one of Nedrelow's products online and, upon finding out he uses Square for his studio transactions, sent the man a bunch of extra card readers.

Square also is part of a Location Books niche imprint Nedrelow runs with partner Ruben Nusz. Nedrelow said the payment technology has proven vital when he's hawking his handsome art-world volumes at book shows.

"I didn't have credit-card processing" before Square came along, he noted, "and I did not want to mess around with getting a merchant account.

"Square is very convenient for me," he said. "It's very portable."

Minneapolis-based Midway Contemporary Art also uses Square. The nonprofit organization, which operates a contemporary-art library and sponsors a variety of art exhibitions, has a need to process payments at its periodic fundraising events.

Square has been a salvation in this regard, said Alice Dodge, the nonprofit's library and grants manager, who learned about the technology from Nedrelow.

"People are amazed when I hand them a device to sign" with a fingertip, Dodge said. "They ask, 'Don't you have a pen?' I say, 'No, just use your finger.' That's kind of fun and it definitely makes the checkout go quicker."

When Minneapolis cartoonist Ursula Murray Husted goes on the road to comic-book shows, her fiance Bryan Bornmueller typically comes along with their Square gear. The artist sells more of her handiwork that way.

"People only have so much cash, but if they can pay with a credit card, that's one more book we wouldn't have sold otherwise," Bornmueller noted. "That pays for all the 2.75 percent processing fees and then some."

In fact, "we've sold some product just because people wanted to try Square," he said. "They do not understand how it's possible to sign with a finger. They say, 'Show me.' The process is very fun for people."

Bornmueller said he has been involved in setting up traditional, fee-laden merchant accounts for credit-card transactions at local companies, and "the expense and complexity is mind-boggling. The impressive thing about Square is how transparent the whole process has been."

Bornmueller likes Square so much that he even uses it in his own life, to settle personal debts.

"I'll go out to dinner with friends and, if nobody has cash, I will pay for everything with my credit card and then charge all of their cards" with Square, he said. "We're all twentysomethings. Who carries cash?"

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