Square Expands its Payments Footprint with Virtual Gift Cards

imageAs the first billion-plus payments startup since PayPal, I’ve been looking forward to watching Square deliver on those hefty expectations.

We got a glimpse today of where it’s heading as the company rolled out virtual gift cards. That’s a business with as much potential as anything it has done to date (note 1). 

And it’s available now at any of the 200,000 merchants that accept the Square Wallet.


How it works

Square mobile app with Gift Card option Consumers can use their Square Wallet app to purchase a virtual gift card ($10 minimum; $1000 max) for any Square merchant. It can be sent immediately to any email address right from mobile app, which is integrated with iPhone contacts.      

As show in the inset, the gift card option is shown under each merchant’s "page" within the Square Wallet app (above the fold).

Square holds the funds until redeemed. The virtual card can only be used by the recipient at the designated merchant using Square’s processing services. In the event that the merchant stops taking Square, the funds will be cashed out and placed in the recipient’s Square wallet for use at any other Square merchant.

Recipients can potentially redeem in three ways, but the last two options only work for merchants that support bar-code scanning at the POS:

1. Square Wallet app
2. iPhone Passbook (if merchant accepts Passbook)
3. Printing or displaying the QR code sent in the original email to recipient (if merchant supports QR code scanning)

If the recipient does not accept the gift card within 90 days, the money is returned to the sender.

So far, there are no fees or expiration dates for the gift cards. But the company must comply with a thicket of state rules on abandoned property and escheatment, so dormant cards are not pure profit unless Square institutes some type of inactivity fee down the road (note 2).

Bottom line

While messy, gift card issuing is a great business that offers numerous monetization avenues (note 2). It demonstrates how potentially lucrative it can be to be both the transaction acquirer and wallet/card issuer. That’s what’s sending Square’s value to the stratosphere. 


1. Email from Square to the gift card recipient


2. The Gift Card "wrapper"
Note: This is one of four designs the sender selects from


3. The Gift Card then needs to be "saved"


4. Non-Square customers are prompted to open a Square Wallet account
Note: For those that don’t want to open a Square account, an "print" option is offered (at bottom of screen), but the merchant must support bar-code scanning for that option to work (see next screenshot).


5. If the merchant does not support bar-code scanning, the gift card can only be redeemed through Square Wallet



1. Here are the current Square business initiatives:

  • Merchant acquiring
  • POS systems
  • Merchant analytics
  • Mobile wallet
  • Merchant discovery/offers/ads
  • Starbucks relationship
  • Merchant loyalty business

2. Currently, Square tells users in the app that "Gift cards through Square have no fees and never expire." So, it doesn’t sound like they’ll be monetizing with inactivity fees anytime soon. 

The iPad-Enabled Checkout Experience at the POS

The Hideout Coffee House in Austin

A few week ago I spent the weekend in Austin eating BBQ, watching my alma mater get crushed by the University of Texas, and sampling the Sixth Street ambiance.

But the highlight for me was the The Hideout Coffee House. Not only did it have great coffee and eclectic furnishings, but card customers could pay via Square through an iPad mounted in a novel wood stand (see inset; it’s not possible to see well, but the ipad stand is on the counter at left).

The barista took my card and swiped it through the Square reader, which was supported by a wood guide (see similar unit left from Tinkering Monkey). Then he flipped the case over 180 degrees so it faced out towards me (see below).

Tinkering Monkey iPad holder at the POSI selected one of the large buttons for a preset tip amount and then once more to have the receipt emailed to me (I only had to enter my email the first time).

It was easier to use than most in-lane POS readers, even contactless ones, because the barista actually did the swipe. It eliminated the uncertainty about when I should tap/swipe or whether it worked or what I should do next. And I loved being able to put a tip on the card with the push of a button rather than writing it on a piece of paper or digging for change. 

Tinkering Monkey swivel ipad caseBottom line: Eventually payments will be made via proximity and settled in the cloud (my mobile will know I’m in the store and will automatically pair me to the store’s POS). But there is still a long transition period ahead.

Tablet/smartphone card readers are a great interim step for smaller merchants (note 2), especially with the price wars waging at the point of sale (note 3).

Related: And banks, even though you don’t have the POS issue, you can equip your frontline staff with iPad-powered sales tools (note 4). 


1. On one of the Austin freeways, I also saw a billboard for the ISIS pilot. But I didn’t see any merchants promoting it. 
2. And some bigger ones. And of course, the 20,000-store Gorilla, Starbucks, is partnering with Square, though it is unlikely they’ll use iPads at the point of sale.
3. Bank of America recently jumped into the game matching Square’s 2.7% discount rate.  
4. Barclays just bought 8,500 iPads to equip its branch sales staff (Financial Brand post).

The Digital Wallet Value Proposition

image There has been more e-ink spilled this year on the subject of mobile/digital wallets than any other financial technology. For good reason. The upcoming shift impacts every major retailer, bank, and card issuer, along with their various supporting technology vendors. 

But there are still those who wonder what all the fuss is about. Doesn’t plastic serve the consumer just fine? It’s fast, ubiquitous, and oh-so much better than the checks and cash it replaced. 

The problem with that reasoning is it only focuses on the “last mile” of payments, the swipe. The swipe is easy. That’s why contactless was slow to catch on. It only converted the physical action from swipe to tap; a tiny benefit hardly worth the trouble. 

imageBut the changes being ushered in now have little to do with hand motions. It’s about simplifying the messy process consumers go through when deciding which card to swipe/tap/insert. Consumers, at least those with the luxury of having multiple payment options, are faced with a fairly complex decision process (albeit repetitive):

  • Do I have my wallet with me?
  • What cards are in it?
  • Debit or credit?
  • Signature debit vs. PIN?
  • What card types are accepted (e.g., Visa/Mastercard vs. Discover or Amex)?
  • What is my balance or available credit?
  • Personal card or company card?
  • Will the card be accepted?
  • Am I in revolving status? If so, what impact will this purchase have on my rate or monthly payment?
  • What are the penalty fees if I go overlimit or am late with my payment?
  • Are they any reward bonuses available on this merchant category with a certain card?
  • Are there any card-linked offers at this particular merchant?
  • Are there any other loyalty perks at the merchant for using their card?
  • What are my rewards balances on various payment options?
  • Do I have any coupons or offers to redeem here?
  • If it’s a joint account, is my spouse making purchases on the card I didn’t know about?
  • Do I trust this merchant, or might I end up with a fraud problem on this card?
  • Do I want the merchant to know anything about me?
  • What is this costing the merchant (if I don’t want to drive up their costs)?
  • Will the merchant give me grief over using this option (e.g., surly cabbies)?
  • Does the merchant have any minimum purchase amounts or surcharges for various purchase methods?
  • For non-revolving credit, when will my grace period be over and I’ll actually have to come up with the money?
  • How easy is it to track the payment for later reimbursement or tax deduction?
  • How hard is it to dispute a charge?
  • Which card did I use here before?
  • Is there more prestige in using one payment card over another?
  • Do I need to curry favor with one issuer vs. another (e.g., to get a better rate or higher line of credit)?
  • What is the foreign exchange rate and are there foreign exchange surcharges?
  • Do I have brand preferences for reasons unrelated to the actual transaction? 

Mobile wallets can use their computing power to instantly resolve these questions and present the user with optimal choice(s). Or the wallet could step in and make the choice automatically which is the key value proposition of the upcoming offering from Wallaby (see notes 1, 2).   

Then there’s the whole issue of receipt management and expense tracking that can be integrated into wallets (see previous post; note 3).

Bottom line: I could go on, but the point is that the digital wallet era is upon us, and consumers are going to love it (eventually). How long it takes to catch on is uncertain, but it should be fun to watch.


1. I was briefed on the Wallaby card, currently in closed beta testing, by its founder Matthew Goldman at Money2020 three weeks ago. Like Google’s rumored wallet 2.0 offering, Wallaby hopes to replace all the plastic in your wallet with a mobile app and decoupled debit card (plastic) for use at the POS. Then after the transaction is made on the Wallaby card, its proprietary algorithm will route transactions to the user’s optimal card based on which offers the highest reward amount for each transaction.
2. For a more thorough analysis, see David Birch’s vision of the “decoupled wallet” future here and Tom Noyes Battle of the Cloud, both published this week. And Glenbrook’s Carol Coye Benson published this opus on Sep 24.
3. Aite’s Ron Shevlin expanded on that in his blog post last week.

Launching: Automatic Location-and-Merchant-Based Prepaid-Card Reloading with Spending Controls

image That’s a lot of buzzwords in one title, but they’re all necessary to describe the payment innovation being tested by MoviePass.

MoviePass is a new service designed to do for physical movie theatres what Netflix did for rentals, turning movie-going into an all-you-can-eat subscription service. For $25 to $40/mo (depending on where you live), MoviePass allows you to attend as many movies as you like (but no more than once per day; note 1).

However, the company has had trouble getting theatres on board, who are rightly concerned about cannibalization. So the startup has been working on ways to get around the need to have theater partners. They tried in-home voucher printing, but it proved cumbersome and still required some level of theatre participation.

So MoviePass invented a clever workaround using a proprietary prepaid debit card. The new system allows subscribers to go to any movie at any theatre in the country, as long as they accept debit/credit cards. The service is in private beta with 1,500 users. You can add your name to the 75,000-person wait list here.

MoviePass iphone app Here’s how it works:

1. User goes to the theatre location and checks in using the MoviePass app (inset). The check-in only works within 100 yards of the theatre.

2. MoviePass then adds the price of the movie to its prepaid card.

3. Consumer walks to the window and purchases a ticket with the MoviePass card using up the entire balance (note 2).

It’s a clever mashup of GPS, point of sale, mobile and payment technologies.

Relevance: No word on who’s powering the card, but hopefully we’ll see it used in other applications. It could be a solution for youth spending (parents preapprove locations/amounts), employee purchases (employers preapprove locations/amounts), or rewards/offers (money appears on your card only when you check in at specific locations).


1. Clearly, the company won’t be able to make a return at $40/mo unless they cut deals with theatres for discounts (especially to fill second-run and weeknight seats), which is the end-game here. At a cost of $5/ticket, it probably works. At $10 per ticket, movie buffs hitting theatres two to three times per week are going to kill the model.  
2. Presumably, MoviePass has controls that limit the purchase to the theatre where the checkin occurred. And it must be limiting checkins to the registered phone only, otherwise the card could be passed to friends and the biz model won’t work. I also assume MoviePass will confiscate any unused balance if the ticket price is less than what was advanced or if the customer doesn’t buy a ticket.    
3. It would be interesting if they also partnered with RedBox so you could get unlimited DVD rentals AND theatres in one monthly price.

BillGuard is First Financial Service to Integrate with the New iPhone Passbook Wallet

imageApple’s Passbook is a massive wildcard in the race for mobile payments, banking and rewards. Will the iPhone’s massive user base take to it like they did iTunes, or will it be one of those ideas that sounded good on the drawing board, but just doesn’t resonate with consumers?

imageNo one knows if it will stick (although I got pretty carried away with the possibilities when it was announced in June), but given the potential upside, it seems a solid bet.

Starbucks is about to push its massive mobile base onto Passbook, a pretty strong endorsement. American Express has thrown in its support. No word yet from other financial players. 

Except BillGuard, which gets to lay claim to being first. CEO Yaron Samid emailed yesterday announcing beta support for Passbook. The startup built a landing page for the new service at <passbook.billguard.com/> (see first screenshot) and is even testing some Google Adwords spending around the feature.

BillGuard users can now view each of their monitored credit cards within the Apple Passbook application. It’s a two-step process to get the cards added to the Passbook utility.

  1. Users click on “Add to Passbook” at top of BillGuard’s normal online dashboard (see second screenshot)
  2. BillGuard sends an email with a “pass” attached for each card. Users view the email on their iPhone, then click each attachment to add to the iPhone utility (see third screenshot)

Once added, user can view their current card balance and recent transactions from the Passbook card (see last screenshots).

Bottom line: It’s a great move for BillGuard, especially since it does not yet have a native mobile app. Now I can click on the Passbook icon and without logging in, quickly see the activity on all my registered cards, and whether there are any suspicious charges.

Banks could do something similar. Basically, creating a no-login card mini-app that aligns their brand with the iPhone 5. However, one area to consider is security. Anyone who got a hold of the email BillGuard sent me could start monitoring my card(s) through Passbook without my knowledge. For a bit more security, passes can be distributed directly through native apps and websites.


BillGuard Passbook landing page (link, 25 Sep 2012)
Note: Example is a Chase card “protected by BillGuard” image

Step 1: Click the “Add to Passbook” button on top of BillGuard’s main online dashboard


Step 2: BillGuard emails a “pass” for each card on file. Users open the email from their iPhone and click the attachment(s) to add each card to Passbook


Results: Each pass has its own “virtual card” in Passbook, with a “front” and “back”
Front includes current balance                     Back includes recent transactions

image     image 

Note: The placeholder barcode displayed in the BillGuard pass is a customer referral form according to MyBankTracker. When Starbucks unveils its Passbook support next week, I’m sure the barcode will be usable to make a mobile payment at the Starbucks counter.

First Look: Google’s Save-to-Wallet API at Discover Card

image This week, Discover became the first to use Google’s new Save-to-Wallet API to seamlessly add its card to the wallet directly from its secure site. This API supports the recent expansion of Google’s wallet to all US-based credit cards. 

To see how it works, I logged in to my Discover Card tonight and looked through account settings and the Help area for details. Coming up empty, I searched for "Google wallet" within the secure site and found a prominent link to the function (see first screenshot below).

The API worked even better than I expected, taking just 15-20 seconds (after I found the right page). Here’s the 3-step process:

  • Press Add Your Card from within the Discover Card secure site (screenshot #2)
  • Enter your Google password into the Google popup page (screen #3; I was already logged into Gmail, so Google had prefilled my username)
  • Accept the API request from Discover (screen #4)

That’s all it there was to it.

Optionally, users can go back to Google through the link on the Discover page (screen #5) to make it the preferred payment card (screen #6). Finally, Discover closes the loop with an immediate confirmation email thanking me for adding the card (screen #7). Well done.

Bottom line: Unless you are big enough to negotiate financial considerations from Google and/or build your own mobile wallet, you might as well drop this API into your secure site now. It gives your debit/credit card a fighting chance to be the default card in the wallet. While that might provide a slight spending lift, the major benefit is associating yourself with mobile wallets in general and Google in particular.


1. Search results for "Google wallet" within Discover Card secure card management (16 Aug 2012)

Search results at Discover Card for "google wallet"

2. Landing page at Discover Card for adding it to Google Wallet

Discover Card landing page for adding to Google Wallet

3. Popup to login to Google account (at Google.com)

Login to Google Wallet through your Google account 

4. Authorization screen (at Google.com)

Google "Add Card to Wallet" API confirmation 

5. Confirmation screen with suggestion that cardholder go to Google to make Discover the default payment card
Note: Highlighting and arrow added for emphasis

Confirmation screen that Discover has been added to Google Wallet 

6. My Google Wallet contains the Discover Card on top

Note: The expired MasterCard below is a remnant of the old Google Checkout that has been replaced by the Wallet

Google wallet containing Discover Card 

7. Confirmation and thank-you email from Discover

Email from Discover Card confirming addition to Google Wallet

Apple Just Put a Mobile Wallet In 100+ Million iPhones: But Is This Passbook a Friend or Foe of Banks?

iPhone Passbook app If it wasn’t obvious already, Apple is becoming the operating system of your life. And since money touches much of what we do, it’s no surprise that the company is moving into the payments side.

Actually, Apple is already there. The most valuable company on the planet is already the biggest payments issuer, with 400 million payment-enable iTunes accounts.

Now, when iOS6 becomes available this fall, Apple will be the biggest mobile wallet provider as well, when 100+ million iPhones automatically getting one with the new OS upgrade.

The new baked-in wallet app is called Passbook, I presume because iWallet was taken, or Apple is saving it for something even bigger.

But regardless of the name, Passbook has broad implications in payments and commerce in general. One look at the UI (inset) shows what banks are up against. An app loaded with store cards! Just what a gazillion big-spending early adopters have been hoping for (congrats to Target and Starbucks for leading the way again).

The main reason iWallet Passbook is such a big deal, besides the Apple halo effect, is that it automatically opens your “virtual card” when you walk in the store. Yes, you read it correctly. Automatically. Opening. Mobile. Payment card. 

Starbucks "card" in Apple's PassbookFor example, when you walk into Starbucks its virtual store card, rendered in 2D bar code, will be triggered on your phone. You just swipe the lock-screen notification, enter a PIN (if necessary), scan your phone at the POS, drink your coffee and enjoy the perks (see below).

Is the POS experience dramatically better than using your Visa/MasterCard plastic? Not really during those 15 seconds of your life, but it’s not worse either. Shaving 2 seconds off transaction time is not what this is about. It’s the retailer value-adds that make it a huge winner.

Smart merchants will tack loyalty points/rewards/amenities (how about a free shot of vanilla in that latte?) on to Passbook-enabled purchases and you will soon be conditioned to pay with your phone. Really, just having your receipt stored safely away in the Passbook app could make the difference between using the store card vs. MC/Visa.

Because Apple wants to be platform, not a bank, they are making the tools available to developers to create apps that play nice with Passbook along with all the other iPhone utilities. So I see this as bank/issuer friendly, so far anyway, though not everyone will benefit.

While this is only speculation, I see a couple things likely to happen:

1. Proprietary single-brand (closed loop) payments make a comeback: With a direct connection to the front-screen of your iPhone as soon as you walk in the door, retailers can put together compelling in-store loyalty offers on the fly. For example, I can walk into Best Buy, and up pops my store loyalty card on the front of my iPhone. And they can dangle all kinds of bennies at me in real time, while encouraging me to pay with my Best Buy credentials rendered in a QR code on the screen (and later via NFC or a “cloud” connection).  

2. Banks and card issuers partner with retailers to become the preferred “Passbook card:” For stores that don’t want to bother with the payments piece, instead of presenting a store card with the customer walks in the door, they could present the preferred partner card. For example, Costco, which only takes American Express, could launch an AmEx Passbook card when customers walk in the door.

3. The beginning of the end for paper receipts: Users will have the comfort knowing their receipts are all accessible via iPhone (and in the iCloud). So they will opt out of paper receipts at the register.

4. Mobile offers/coupons just found a new home: If you want iPhone-wielding consumers to see your offer, Apple just created an instant place to store (and discover) deals. I’m not sure if this is good or bad for ad-supported banking, but it’s something to consider.

Bottom line: I could go on (for instance about Siri integration), but my head is about to explode with all the possibilities. Time will tell, but I think we just witnessed a watershed moment in mobile-enabled shopping and payments. 


Recommended reading:

  • Read the full analysis by Glenbrook’s Scott Loftesness here.
  • Fantastic stuff on on Quora too (HT to Brad Strothkamp for the link via Twitter).
  • The list of all the features via Techcrunch.

Mobile Monday: Intuit Launches 17th iPhone App, MoneyDue

Note: Since I didn’t get my Feature Friday post finished last week, it’s now been transformed into Mobile Monday.


imageWhile most banks still have a single mobile app, the big players will eventually have a portfolio of apps for their various product lines, business units, and disparate customer segments (note 1).

While technically not a financial institution, Intuit shows why multiple apps are needed. With the launch of MoneyDue (see below), the company now has at least 17 apps available for the iPhone.

Tax-related (7)
Earned Income Tax Credit calculator
Intuit Tax Online Accountant
MyTaxRefund by TurboTax
TaxCaster by TurboTax
TurboTax 2011 Tax Preparation
TurboTax Card Mobile
TurboTax SnapTax

Payments (2)
Intuit GoPayment Credit Card Terminal
MoneyDue (ebilling for small service providers; see below)

Small biz (5)
Online Payroll
QuickBooks Mobile
Small Business Blog
Snap Payroll California Free Mobile Paycheck Calculator
Weave (project management)

Consumer (3)
Quicken Essentials for Mac
Intuit Health Debit Card
• Mint.com


MoneyDue: Ebilling app for hourly-based professional services

Intuit's MoneyDue iphone appFor almost 30 years, Intuit has been a key financial services innovator. So I’m always interested in the new services coming out of its R&D area.

Here’s one that seems like a winner, a mobile small biz ebilling app specifically targeted to those that bill their time by the hour (or appointment).

The app integrates with the iPhone calendar and contacts to seamlessly turn appointments into ebills in a 3-step process (see screenshots below):

  1. Select an existing appointment from iPhone calendar
  2. Select the corresponding person to bill from the iPhone contact list
  3. Enter the billing amount and send

It would be especially useful for one-person shops such as lawn care, home improvement, cleaning services, tutors, etc. The main downside is that the appointment and contacts must already be loaded into those iPhone functions. You cannot create a new bill directly from the MoneyDue app if it hasn’t already been scheduled on your calendar (note 2). 

The app hit the app store on May 30 and has been a top-150 finance app since for the past few days.


Intuit’s MoneyDue iPhone app (2 June 2012)

  image   image   image    

1. See our mobile apps forecast here (April 2010, subscription)
2. The iPhone automatically syncs with your desktop calendar (eg. Google’s Gmail calendar) so you needn’t set up the appointment on your mobile phone.

Feature Friday: Paying Online with Cash

imageI love headline alliteration and it’s good to have a shtick, so I will periodically post a “Feature Friday” here. It turns out I started last Friday with Capital One’s new mobile rewards feature, the ability to trade rewards points to pay for PAST travel (and they did it without resorting to time travel).

PayNearMe mobile option This week, old-school cash was in the news:

  • Finovate fan favorite PayNearMe launched a mobile version of its cash-based payment service that allows users to buy online then take the receipt to 7-11 to pay in cash (or card). Until now, the system relied on a printed receipt to hand over to the cashier. And printing is so 2009. The new mobile version (inset), does away with the printing, allowing users to show the cashier a barcode rendered on a mobile phone. From then on, the process is the same.
  • WalMart just launched a “pay with cash option” that works with its Walmart.com site (screenshots below). The company could extend the service to purchases at other ecommerce sites if it wants to drive more traffic to stores.

Relevance for Netbankers: While we don’t spend much time here discussing cash, it’s still important across most demographics. And banks have a huge stake in the game with their ATM bases and other cash-handling infrastructure.

Banks could do the same thing as PayNearMe, using their branch and ATM networks to take cash over the counter as payment. And many parents may prefer sending junior to the bank instead of the convenience store.

But I also wonder if we’ll see the reverse? Instead of handing cash over to the 7-11 clerk, parents can transmit a bar code to their kid’s mobile to allow them to walk out of the store with a crisp $20 for lunch and a bus ride home. And it would make sense to extend that capability to mobile-enabled ATMs and even branches.

Anyway, that’s all for this week, have a great one!


Walmart homepage (27 April 2012)

Walmart homepage promotes pay with cash option

Homepage popup lays out how it works

Walmart.com popup lays out how it works

Walmart checkout

Choose “cash” icon under “enter a new payment method”

Walmart online cart with "cash" payment option

Mobile Banking & Payments by the Numbers

Statement rewards provider and BillShrink parent, Truaxis, published a nice summary of mobile banking and payments on its blog (reprinted with permission below).

A few Industry Players metrics at the bottom of the infographic have recently been updated:

  • Starbucks said this week it has processed 42 million mobile payments, up from 26 million (Venture Beat, 9 April 2012)
  • Square has now shipped 1 million readers, up from 500,000; and is now processing $11 million per day, up from $4 mil (Splatf, 5 March 2012)

Mobile banking & payment infographic

Pageonce Adds Billpay; Showcases Multiple Mobile Apps on Single Page

image Last week, we looked at how Square makes a single webpage look great across various mobile platforms. Today, we look at the exact opposite problem. How to showcase your various mobile apps on a single webpage. 

Pageonce does it as well as we’ve seen, using a single showcase panel that includes all five of its mobile app platforms across the top: iPhone, iPad, Android, BlackBerry and Windows. Users can scroll horizontally to see two sets of screenshots for each platform.

The company also includes version number, date of the last update, and app size in the lower right corner. And of course, there’s a link to download the appropriate marketplace to download the app. The Android page uses a QR code instead of a link.

In other news, Pageonce added bill payment to its iPhone and Android app today, moving ahead of Mint in the features arm race. The new Gold service, which we haven’t tested yet, is priced at $4.99/mo, good news for fee-starved online financial providers. Mint says it has bill payment coming too. It will be interesting to see if they put a fee on it.

Relevance for Netbankers: The addition of transactional services such as bill payment makes third-party PFMs, or virtual banks such as BankSimple, bigger threats to mainstream banks and credit unions. As uber-consultant Richard Crone always says, "He who enrolls, controls."


Pageonce iPhone app

Pageonce iphone app showcased on its website


Pageonce on ipad


Pageonce on Android


Pageonce on BlackBerry


Pageonce on windows phone


Note: We cover mobile banking and payments periodically in our Online Banking Report (subscription).