Lauren Goode

Recent Posts by Lauren Goode

Square Slides Into Apple’s Passbook With Digital Gift Cards

Square, the digital payments company known mostly for its square-shaped, credit card-processing gadget, is giving its users a gift this holiday season.

Lots of them, actually: The company just rolled out digital gift cards that can be exchanged between both Square and non-Square users. The cards can be presented and redeemed in a variety of ways, including through Apple’s Passbook app — Square’s first integration with Apple’s new digital wallet.

Square creator Jack Dorsey was taking interviews earlier today in New York City and showing off the new gift cards.

Here’s how it works: A Square user must first update the existing consumer-facing app, simply called “Wallet” (formerly named Pay with Square). Or, if you’ve never used Square, you’ll have to download the Wallet app.

From Square’s directory of approximately 250,000 businesses — merchants using Square software on an iPad to process their in-store payments — a consumer can opt to send a friend or family member a gift card from one of those stores. This, of course, includes digital gift cards from Starbucks, which recently began using Square to process credit card transactions at 7,000 locations across the U.S.

An email will then be sent to the recipients, with a few different options for redeeming the gift card. The customer can use Square themselves, send the gift card to their Apple Passbook app on iPhone or just show a QR code at the store. The recipient can also print out the QR code from their email, if they want to skip using a smartphone entirely.

By working with Passbook, Apple’s digital wallet app for iOS 6 that stores loyalty cards, coupons and airline boarding passes, Dorsey said the company is hoping to turn even more consumers on to Square. He also said the gift card program will appeal to Square merchants, as it doesn’t involve additional issuance fees — just the standard Square processing fee.

But the biggest benefit is probably the word-of-mouth marketing Square will get as its users send around digital gift cards. The company also further establishes itself as some sort of card issuer.

In other words, it might not really matter to Square if people actually end up using the gift cards — and there’s a good chance you won’t. Last year it was reported that from 2005 to 2011 the total amount of money on gift cards that went unspent could be as much as $41 billion. At the same time, merchants still reap the benefits of the upfront purchases of a gift card (in most U.S. states).

Sure, having a gift card on your smartphone might make it easier for some people. But there’s probably also a huge segment of consumers that haven’t adopted digital gift cards yet.

Dorsey also talked about Square’s international expansion plans, and said the company plans to make its first official footprint overseas within the first half of 2013. He declined to say whether that will first occur in Europe, Asia or South America. “Europe uses chip and pin technology, which we have to look at closely. In Japan, consumers are using their smartphones for more and more things, and in places like Brazil new technologies are just adopted so rapidly … they’re all pretty exciting,” Dorsey said.


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik