The Apple Pay and Square partnership expanded access to contactless payments by bringing Square’s NFC-enabled payment reader to Apple’s online and U.S. retail stores. The reader allowed smaller merchants to accept Apple Pay and other NFC payment methods without investing in the more complex point-of-sale infrastructure commonly deployed by major retail chains. It also supported contactless EMV cards, inserted chip cards, and traditional magnetic-stripe payments.
For Apple Pay, the relationship with Square offered an opportunity to extend acceptance beyond the large merchants that dominated its initial rollout. Small and midsized businesses represent an important part of the payments ecosystem, and affordable NFC hardware could help eliminate one of the barriers preventing them from accepting mobile payments. For Square, greater exposure through Apple’s retail network could help expand adoption of its merchant payment technology.
Apple is expanding its relationship with payments tech company Square for the Apple Pay platform, in that Apple will sell Square’s NFC reader at both its online and retail stores network. Later generation iPhones plus the Apple Watch can take advantage of the NFC technology. Square has already been a supplier to the Apple retail network via its mag stripe card reader.
Square has announced that its new NFC reader that enables small businesses to accept Apple Pay, Android Pay, and other contactless payments can now be purchased from Apple online or in U.S. stores for $49.
The reader is compatible with NFC-equipped smartphones, including the iPhone 6 or newer, and contactless EMV chip debit and credit cards based on technologies like American Express ExpressPay, MasterCard PayPass, and Visa payWave.
The NFC reader, which connects wirelessly with iOS and Android devices via Bluetooth, also works with EMV chip cards that are inserted for Chip-and-Signature payments. Square includes a magstripe reader in the box for accepting traditional swipe payments as well.
Launched in 2014 to mostly large merchant chains, Apple Pay has limited availability across the different tiers in the retail world. This expanded partnership with Square will enable Apple Pay access to small and medium sized merchants. However, there will still be educational and acceptance hurdles to cross, for both merchants and retail customer users alike in warming up to Apple Pay.
Meanwhile, Square is still trying to find its sea legs during its first year as a public company, and they clearly need a boost to grow their revenue base and earnings potential. While this deal will not be a panacea for their near term performance, it never hurts to have Apple as your partner.
The Apple Pay and Square partnership could benefit both companies by expanding the infrastructure needed for contactless payments. Apple gains greater access to smaller merchants, while Square strengthens its position as a provider of flexible payment acceptance technology for businesses that may not use traditional merchant terminals.
Hardware availability alone, however, does not guarantee greater Apple Pay usage. Merchant education, employee familiarity, and consumer willingness to pay with smartphones remain important adoption challenges. Expanding acceptance is an essential step, but sustained mobile payment growth ultimately depends on giving merchants and consumers compelling reasons to use the technology regularly.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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