Now it’s working on the other side of the equation: The consumer. The company is rebranding its consumer product, formerly dubbed Card Case.

Pay with Square, as the app has been renamed, now has participating merchants listed at the forefront of the free app, rather than hidden on cards in the old app’s virtual wallet. It also includes a curated list of featured merchants, a search bar, and a tilt-to-map option, which allows the user to tilt their phone to make a map appear and display a merchant’s location.

Square has also added geo-fencing capabilities to the Android app, which will allow customers to pay for an item at a participating store simply by walking in and telling the merchant their name.

Square’s move comes as mobile payments continue to heat up — and as competitors like PayPal and Intuit move into Square’s traditional territory.

Square first launched Card Case last May, but the app has gained little traction. While Square now claims $4 billion a year in mobile payments transactions, only about 75,000 of its one million merchants are accepting payments via Card Case.

Megan Quinn, director of products for Square, said that merchants that have taken payments through the app have seen a 22 percent increase in revenue.

“Square isn’t just about accepting credit cards,” Quinn said. “Our focus is the whole ecosystem, and we don’t think anyone is making the whole experience as easy and delightful as we are.”

Square’s app update comes just as online payments giant PayPal has started focusing on offline payments solutions for both big and small businesses, including PayPal-branded point-of-sale payments systems in Home Depot stores across the U.S., as well as a mobile payments dongle for iPhone that rivals Square’s small business solution. PayPal claims more than a hundred million users worldwide, whereas Square has yet to expand beyond the U.S., though it’s clearly taking steps in that direction.

The new app, Square Register, comes with a free, detailed analytics system for business owners, and more integration with Card Case, Square’s consumer-facing app that allows people to pay with their smartphones just by being in the vicinity of a Square-using business.

Square, which utilizes a small plastic dongle that fits into the audio jack of a smartphone or tablet to process credit card payments, first introduced an iPad app last May. In November, the company rolled out Square 2.2 for iPad, iPhone and Android phones, allowing merchants using the technology to offer rewards to customers who make repeat purchases. Square has said it has no plans at this time to launch a version of its app for Android tablets.

The San Francisco-based start-up is now processing $4 billion in payments annually, double the rate it said it was processing in the fourth quarter of last year.

Square’s new iPad app arrives as companies both small and large are racing to develop systems to replace traditional point-of-sale systems — amid plenty of sniping about security, as well.

Last week, online payments giant PayPal rolled out its “offline” point-of-sale system in 2,000 Home Depot stores across the U.S., which will allow customers to pay for items using a PayPal card or mobile phone number and PIN combination. A Visa executive has criticized PayPal’s in-store system, saying that data thieves could easily see a PayPal-paying customer enter their private data at a terminal. PayPal responded by reiterating its commitment to payments innovation, saying a user’s data is more secure in the cloud than it is in their pocket.

Visa, meanwhile, has been working on its own digital wallet service, called V.me.

There’s also Isis, the mobile payments joint venture led by Verizon Wireless, AT&T and T-Mobile USA, which will compete directly with Google Wallet, the payments app developed by Google for Android phones.

And now some two dozen retailers, including Walmart and Target, are working to develop in-store mobile payments systems that would compete with the current systems available, according to a report from The Wall Street Journal. According to the story, the merchants say that they’re concerned about potential security and privacy risks in the existing services.

But unlike some of these services, Square has been focused on small, “mom-and-pop” businesses and contractors, who may not want to invest in bulky credit card systems with higher transaction and interchange fees. In December of last year, the company announced that it has more than one million merchants that can accept credit cards.

On March 1, a proposal to test Square in 30 New York City taxicabs was approved, as the city’s Taxi and Limousine Commission explores new technology that could enhance the process and possibly lower credit card transaction fees. The contracts for credit card payments in cabs right now are held by Creative Mobile Technologies, LLC, and VeriFone, Inc. — which has previously alleged that Square has a “serious security flaw.”

An expected software update on a slow day at the end of December is hardly big breaking news. But for start-up company Boxee, it signals a shift away from its software for PC browsers and a focus on Internet-connected TVs: The company says version 1.5 of the software will be its last Boxee update for PCs, Ubuntu and Mac computers.

It will be launched along with a Live TV dongle for the Boxee Box later in January.

Version 1.5 of the downloadable software on the Web will include better file support, a new onscreen display, search functionality, HTML5 WebKit-based browser, and will support multiple languages. It will run on Windows XP, Windows Vista, Windows 7 (32 bit and 64 bit), Mac OS X 10.6 and higher, Linux Ubuntu 11.10, and will be available on Boxee.tv through the end of January.

And for those who would rather develop their own software for Boxee: The company is also releasing an open source version of its software.

The update won’t, however, offer PC users access to the same apps that are available on the Box, such as Netflix, Pandora and VUDU.

Boxee first launched in January 2010 as a Web application for watching Internet video online. In November 2010, it launched its awaited Boxee Box device, which came with a nifty Qwerty-style remote and offered a variety of apps — but it launched amid a growing market of Internet-connected TV boxes, including Apple TV, Google TV, Microsoft’s Xbox and the competitively-priced Roku box. At the time of the Boxee’s hardware launch, about 1.5 million people were using the Boxee software.

Boxee explained its shift away from Web software by saying it believes the future of TV will be driven by Internet-connected boxes, connected TVs and second screen devices like tablets. “While there are still many users who have computers connected to their TVs, we believe this use case is likely to decline as users find better alternatives,” Boxee wrote.

The company also said that the lack of premium apps on the downloadable version of Boxee was due to extensive DRM and certification requirements.

With the mobile payments space rapidly heating up, we thought it would be a perfect time to add the person most responsible for that current disruption–Square CEO and co-founder Jack Dorsey–to the speaker roster at the ninth D: All Things Digital.

By the way, Dorsey is the same man who also invented a little thing called Twitter, the groundbreaking microblogging service–where he also now serves as Executive Chairman and now its product guru once again.

In other words, Dorsey is just the kind of person Walt Mossberg and I are thrilled to have onstage at D9–a perfect entrepreneur to talk about the innovative product vision that has made tech in Silicon Valley so powerful.

Dorsey started Square in 2009, after serving as CEO of Twitter until 2008. A software engineer by training, he previously worked as a programmer at a bike courier dispatch service.

Just this week, Square made news by launching a new cash register for merchants and a new mobile wallet for consumers to make paying for retail goods extremely easy.

This is a quick development from the start-up’s original Square dongle and app, which allows consumers to use their smartphone or Apple iPad to accept credit card payments.

Square has distributed 500,000 of these dongles, which click into the headphone jack, and has recently said it is processing $2 billion in gross payment volume per month.

The new innovations should increase that if they catch on and Square can best a plethora of competitors, including a new digital wallet entry by Google (whose Executive Chairman Eric Schmidt will also be at D9 onstage demoing it too).

As Tricia Duryee wrote about Square’s latest effort:

It starts with the user’s card case, which must be set up in advance with a user’s credit card information. From the card case, the user will be able to see the menu of the restaurant, cafe or spa they are visiting. Users can click to order. When they go up to the register to pay, the consumer doesn’t hand over anything but their name.

Consumers and retailers will have to believe that using Apple products can be as safe and secure as big enterprise-grade systems that everyone is accustomed to seeing.

Square will also have to go up against a ton of other providers coming down the pike, including solutions from [eBay's] PayPal and payment giants such as Visa, MasterCard and American Express.

The San Francisco-based start-up recently received an investment from Visa.

Given that the future of the massive, badillion-dollar industry is at stake, it should make for a great interview session at D9.

In response, Square’s CEO Jack Dorsey said the claims weren’t “fair or accurate,” and that VeriFone was overlooking all of the protections already built into your credit card.

VeriFone’s awareness campaign may be considered a little unconventional.

The company went as far as to launch a web site, record a video, and develop a mock-iPhone app that demonstrates how easy it was to use Square’s dongle to skim information off of a credit card.

Reactions to VeriFone’s approach largely sided with Square.

In comments on our site and on other venues, including Twitter, respondents mostly waived off the concerns, saying that VeriFone was feeling threatened by Square’s progress in the market.

In an exclusive interview, VeriFone’s CEO Doug Bergeron explained why the company felt it was necessary to launch the campaign.

Actually, the interview was positioned as a way to “clear the air,” although as you’ll see, those were not his words, but rather the phrase his public relations people chose to use in pitching us.

Here is our conversation, which has been edited for length and some context, but is largely as it happened.

Duryee: I was told you want to “clear the air” about VeriFone’s actions last week.

No, I don’t think that’s the way I would put it.

I believe that’s a direct quote from your PR person.

Well, I can’t help what they say.

But this is a very interesting time in mobile commerce. There’s a lot of things happening, and a lot of innovation that is happening, and yet, and yet a lot of historical issues that haven’t gone away.

[Skipping ahead in the interview] How is your smartphone product different than Square’s?

We’ve been selling PAYware Mobile for about a year, and it is selling well. Square is the only one that I know of that doesn’t encrypt their data.

We don’t use a dongle. We use a sleeve, or basically it’s a small cradle that the phone sits in. What’s different is that we encrypt the data, which means it costs $25 to $35 more to provide that technology. We aren’t creating fraud. We want consumers to be able to accept credit cards. But if you cut corners it causes problems.

We’ve been mentioning it for awhile, but we thought we needed to be heard.

Did you approach Square directly?

We’ve been in several conversations–not just with Square–but with the industry, and not just about Square, but about hypothetical devices.

We don’t want an industry that’s been moving toward simplicity, which we think is good, to move toward technology that’s allowing fraud. We don’t want it to go in wrong direction.

Did you give Square a heads-up that you were going to do what you did?

I don’t know who our PR folks talked to or didn’t.

Your PR folks told me that you had a meeting with Square’s CEO Jack Dorsey the week before.

I did see him in New York. We were at a similar meeting. I brought up the security issue, and asked him how are you addressing security? The answer was still, the networks will take care of it.

That’s not the way the rest of the world is treating this.

Networks have programs that monitor transactions, and they’ll call you if you are traveling, and there’s systems that can identify things post-facto, but that’s after the fact. The rest of the world has used smart cards and other mechanisms to stop fraud where it happens.

So, the networks can take care of it?

It’s not good enough. We should be joined arm-and-arm to make sure customers trust these systems and make sure that fraud goes down. I don’t think retailers like paying the highest interchange rates in the world, that’s not fair.

Was your open letter fair to Square?

[He laughs.] Listen it’s a competitive world. We take our role as a leader in the industry seriously. We gave them a heads up and free advice that you shouldn’t be allowing systems out there, unencrypted. If that’s fair or not, it’s not the issue here. We collectively need to create new technology to reduce fraud, whether you are a venture-backed business or a big businesses. We are both responsible for our own decisions and should be able to fend for ourselves.

Were you worried they were gaining traction in the market?

No, not at all. We don’t know what traction they’ve seen. We might be doing more than them. I have no idea. It is worth noting that we do less than a couple of million dollars a year with micro-merchants, such as garage sales or Girl Scout cookies. But that’s not the essence of VeriFone. This is not our massive attempt to protect two million in revenue. If that’s what you think, you are missing the point.

We are not worried about competition in one of our $2 million segments, but we are worried about the industry not being concerned about the third rail of skimming, which is smartphones not using encrypted data.

Still, a lot of the feedback in the comments on our site and on Twitter was that you felt threatened by Square.

I notice Verizon and AT&T advertise whose systems don’t work. Oracle advertises against HP, by saying their systems have more processing power. I’m not quite sure how this is different. We have a solution that encrypts data and reduces fraud. If that’s not worthy of identifying and knowing, what’s wrong with that?

Well, maybe you went too far by making the faux iPhone application available for download on the site?

If we didn’t, we would have been accused of blowing smoke. The fact that we could do it [build one] in an hour demonstrates how serious of a problem it is.

[NOTE: PR jumps into the conversation, adding that the application on its site was only for demonstration purposes. No one could actually download it and skim credit card information with it. It was only to show it was possible, but there was no actual risk.]

You really believe that the Square dongle will be used for harm?

They certainly could. It’s a skimmer that doesn’t look like a skimmer. You might be using a merchant that you trust, and they are skimming right in front of you and don’t even have to go in the back room.

Now that you’ve voiced your concerns, what happens?

I don’t know. We all continue to go along our paths and try to improve paying at the pumps, and paying at the table, and try to continue to promote that smartphones are great and that the data should be encrypted…

We have a competitive reason to do so, and we believe we have a differentiated product. This can be solved. This isn’t rocket science. They can add encryption and they’d be done.

There is no next step. We’ll continue to sell the most robust in the industry, and reduce fraud and feel good about it, and they’ll continue to do what they do.

[From earlier in the interview. Bergeron provided the company's historical context in the industry, which led them to the decision to write the open letter last week.]

Without the benefit of 30 years of watching historical issues, it’s easy to see how our campaign last week was considered unconventional. But the reality is we are speaking to a very seirous issue here.

The first has to do with the ongoing concern–even worry–that retailers large and small are having with conventional card brands.

It plays out like this: I see you give me a lot of value to accept debit and credit because customers like it, but this notion that I’m paying the highest interchange rates in the world in America–15 to 25 percentage points of my revenue. Whereas, the rest of the world on average pays 10 percent. As a retailer, I’d say I’m just not getting how the 25 percent that I’m giving up to the card ecosystem is valuable.

The response is: The reason you pay the highest interchange rates in the world is because there’s a lot of fraud in the system.

Some of it goes to profits and managing the network, but a big piece of it is a pooled risk to cover the fraud in the system. The reason European retailers pay significantly less is because there’s a lot less fraud in the system. Ditto Canada and Australia.

Every other country has taken technology to eliminate or reduce the incidence of fraud and skimming. Therefore there’s less fraud and interchange rates come down.

Every day of the week, I hear them [retailers] complaining about interchange. I defend it. We are what we are, and there’s fraud in the system–that is what it is. We have made it our mission to go after the sources of fraud.

There’s two big areas of fraud, and the unregulated smartphone dongle is creating the third.

What are the two big sources?

The two biggest sources, which Forrester, IDC and NPD would all agree, is gas pumps and restaurants.

And there’s a reason for that.

Gas pumps received a waiver from Visa and other card companies.

They were leaned on by the oil companies, which claimed that meeting PCI compliance at each gas pump would have been really painful for the gas stations. And therefore at the 800,000 pumps today, unlike most stores you go to which use compliant technology sold by VeriFone or others, there’s nothing protecting your data there.

These pumps are serviced in the middle of the night by independent operators. It turns out that there’s a few master keys running around, which open up hundreds of thousands gas pumps, and then skimmers are inserted in the pumps and the data is captured.

Fraud gets created, and interchange has to stay high.

I thought gas stations experienced high fraud because the credit card has already been stolen, and can easily be used at the pump?

No, the signature doesn’t act as a deterrent. There’s a lot of unattended systems, where there’s not a person there, and they are all compliant and are encrypted. Only in America do these pumps exist.

And, what about restaurants?

The second area where there is a lot of fraud happening is in restaurants. You give your card up to the waiter, and they copy it. We agree [with Square] that copying cards down is a form of skimming.

Restaurants are the last frontier. Restaurants are the only place, where you give your card to a stranger and they go in the back room. So much happens in restaurants. They can get the number on the back, or run it through a skimmer, which are commonly available.

We have tech solutions to solve the two big problems, which would go a long way to reducing fraud, and probably reducing interchange.

Which leads us to how you believe Square is creating a new unencrypted point of sale?

We fear it is the third place, where data is being transmitted through a non-payment device without encrypting it before it goes in.

We have an iPhone product called PAYware Mobile.

We are on a mission here to reduce interchange for retailers by increasing the use of technology at the point of sale. We’ve been telling the story to card associations, customers and major retailers for the past year…It’s not just about reducing interchange for retailers when customers get their identity stolen, it’s a major pain in the you-know-what.

We think we are on the cusp of mobile payments, and there’s going to be more and more done with the phone. We want to make sure it is done securely because if there’s a major pandemic of fraud using cellphones, it’s going to slow the adoption.

We not only support mobile payments fully, we were great proponents of the use of smartphone as credit cards and acceptance systems–our point is let’s be consistent with the rest of the industry.

The details, from MusicWeek (via Coolfer): You give the company 100 British pounds, and for the next year you can download all the music you want. And because you’re downloading the files in the unencrypted MP3 format, they are yours to keep, and yours to do whatever you want with: Play them on any Apple (AAPL) iPod or iPhone, make copies, burn them to CDs, etc.

Are there catches? Of course: The offer is only available to U.K. residents, who have to use a special USB dongle to make the Datz software work, and it only works on PCs running Microsoft’s (MSFT) Windows, for now. Most crucially, the company only has music from two of the big four music labels–EMI and Warner Music Group (WMG)–and it doesn’t even have all of those companies’ new releases, but a “wide selection of new music released in 2009.”

But play along, for just a minute. Say Datz does end up striking deals with Sony (SNE) and Universal Music Group (and the other big indies), and does end up getting most of the majors’ catalogs. And say Datz is still able to keep the price point about the same: Something in the $15 a month range for unlimited music to own. Could that work, from both a consumer and industry perspective?

Yes. It could.

That’s around the same price point as music subscription services offered by RealNetworks’ (RNWK) Rhapsody and Napster’s (NAPS)/Best Buy’s (BBY) Napster.com. The big difference: Those services only give you access to music, not ownership. And while I’m not hung up on owning music as long as I can get what I want when I want, I’m in the minority on this one.

But if you could hang on to your music–and not have to worry about what format you’re using, since MP3s will work on all formats–then that seems like a compelling offer. The thought of shelling out $162 in advance will likely give people pause, but presumably Datz could figure out a way to extract the payments, à la the mobile carriers, over a one-year period.

Meanwhile, $162 a year is much, much more than most people were ever spending on CDs, even during the format’s boom years. And those, obviously, are long gone. Today the industry would be pleased if the average consumer spent $20 a year on music, no matter what format it’s in.

And yes, we know what many of you are going to say: Why pay for music at all when I can steal whatever I want? Or the faux-sophisticated alternate version: Music should be free! Because it can be replicated for no marginal cost!

Well, can’t argue with that–unless you’re in favor of compensating people who create intellectual property for their work. And I’m one of those old-fashioned types who still thinks that’s a good idea. Hope Datz can pull this off.