PayPal has long dominated the electronic payment space, having launched roughly 12 years ago with a roster of 98 million users. Goliaths like that are hard to challenge, but a few start-ups are offering innovative ways to virtually swipe a card that consumers are beginning to embrace.
Square started two years ago when techie turned glass blower, Jim McKelvey, turned down a sale because he wasn’t set up to take credit card payments. He called up his friend Jack Dorsey to chat about the lost opportunity and the next year, they created a little magnetic reader that plugs into an iPhone through which a card can be swiped.
Last week, the company launched a Square app that can be downloaded to an iPhone and works like a virtual wallet where you can store credit cards. Vendors also using the technology can find your registered card on their list of active customers and charge you the bill. It’s a good idea, but with only 50 businesses using it across the U.S., Square has a ways to go before they reach PayPal-like fame.
Linus Olsson, co-founder of Sweden-based online micro-payment service Flattr, says space for innovation in the industry is huge and much-needed. He writes in an e-mail about the new Square app: “It’s really cool, very well executed, and hits the spot for what people want but never get from digital payments.” When asked whether he thought it could be a game-changer, he writes: “That is only a question of user adoption, if people want it and use it, only then will it change things. The thinking behind Square is just what the established payment companies should have thought of a long time ago but apparently don’t have the ability to do. From what I have seen it ticks off a lot of the boxes I think it needed to succeed.”
Olsson’s own creation, a combination of the words flat-rate and flattr, seeks to challenge PayPal as the only way to financially reward someone for online content. Users pay a lump sum of their choosing each month, and the money is divided equally amongst the number of sites with a “Flattr” button they decide to click on throughout that month. The site was launched over a year ago and had 15,000 users within the first two months (they no longer release numbers).
Flattr will never replace PayPal and Square, mostly because its goal is to motivate people to keep making good content, rather than enable them to survive off their earnings. It does, however, show there is room for innovation in the digital payment sphere. “Digital payments are the elephant in the room everyone wants to get rid of but no one managed to fit through the door,” writes Olsson. “The last few years have been amazing for the usability of the internet, everything on the net has been simpler and better, except payments. They basically work the same way as 10 years ago and one could argue it’s the biggest hurdle for further development of the digital arena.”