Square CEO Jack Dorsey revealed in a tweet Sunday that his mobile-payments company had added a gift-card function to its app for local shoppers and merchants.It’s a powerful new way to get new consumers—especially the late adopters who aren’t eager to replace their wallet with their smartphone—exposed to Square, and to drive traffic to Square’s 250,000 local merchants.
You’ve never needed a smartphone to pay with Square, of course: You can simply swipe a credit card at a Square-equipped merchant, who uses a card reader that hooks into a smartphone or tablet to process the payment.
And likewise, you won’t need a smartphone to use Square’s virtual gift cards: Recipients can print out a certificate with a scannable QR code (a digitized image similar to barcodes).
Or if they have an iPhone, they can add the card to their Passbook digital wallet, a feature that’s built into Apple’s latest operating system, without downloading the Square Wallet app. iPhone and Android users with the Square Wallet app can add the cards to their account, of course.
There’s one feature that makes Square gift cards far more customer-friendly than other similar products: Square spokesperson Khobi Brooklyn tells us that unused cards can get fully refunded to the purchaser. The cards also don’t expire and don’t charge monthly fees.
The move is well-timed for the holidays. But it’s been in the works for months. In July, Business Insider learned that Square had applied for a money-transmitter licence in California, its home state. The money-transmission law there is very broad, and encompasses stored-value products like gift cards. (Square’s application still appears to be in process.)
PayPal has long offered virtual gift cards good at specific merchants, but those are only good for online payments, not in-store purchases, according to PayPal’s documentation for the product.
The scannable QR code also sounds similar to the way Square handles payments at Starbucks coffee shops, where registers have not yet been upgraded to handle payments in the same way they work at most Square merchants.
Square is also now selling virtual cards for Starbucks, though it’s not clear how those are superior to regular Starbucks gift cards, which the coffee chain has long offered in digital-only form.
Last month, Square has said it’s doing the annualized equivalent of $10 billion a year in payments, not including its deal to process all credit- and debit-card payments at Starbucks stores.