Understanding Security Risks of Mobile Credit Card Readers

The Square Reader makes it easy for small businesses to process customer payments, but are mobile credit card readers secure? Find out what customers and entrepreneurs say.
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In a day and age when we pay for almost everything with a credit card or debit card, it’s not surprising that one of the fastest-growing areas of credit card technology is mobile payments. And one of the fastest growing applications in that field of on-the-go transactions is the Square Reader, the mobile phone attachment dreamed up by Twitter co-founder Jack Dorsey.

How Mobile Payments with Square Work

Square Reader is a simple way for small businesses or individuals to take credit card payments without setting up a complex merchant account with a bank and credit card company.

How to operate Square Reader for paying customers

A user simply sets up a free Square account, links it to their bank account and plugs a small, free Square card swiper into the headphone jack of the smartphone. The Square Reader is used along with the Square Point of Sale app available for mobile devices running Apple iOS and Android.

Once the Square app is installed, you simply swipe a card, get a fingertip signature on the screen and the money goes into your bank account, minus a 2.75% fee when swiping major credit cards.

Security Concerns of Mobile Payments

Many of mobile payment transactions are coming from small businesses that have trouble getting set up to take credit cards. Square, on the other hand, is easy to set up and works with the iPhone, iPod Touch, iPad and Android-powered phones – without the monthly fees and contracts required by credit card companies.

But some consumers may be wary of using mobile credit card readers over fears of data security of their personal and financial information. A study by Auriemma Consulting Group revealed about one-third of customers who make purchases via mobile payments were worried about security.

Square previously responded to data security concerns raised by a competitor by noting that your credit card’s information can be hijacked with ease in any number of situations–such as when you give it to the waiter in a restaurant. That’s why banks don’t hold consumers responsible for fraudulent charges.

In addition, the Square website states that swiped credit card data is encrypted to protect financial information.

What Small Business Owners Think of Mobile Credit Card Readers

Square seems to be a big hit with small merchants, who like the simplicity and like to avoid fees from credit card companies. Artists who sell their wares in the studio, crafts people selling their creations at open-air markets and in-laws paying each other back for small loans are all using the convenient device and they are crowing about it in the media.

Blogger David Greenbaum, for instance, said that when he tried to set up a credit card account for his computer repair business, he found the process to be full of questions and complexity. He eventually turned to Square and hasn’t looked back.

“Square is doing to the credit card industry what Apple has done for mobile computing–making cutting edge technology simple and accessible,” he said.

About Author
Peter G. Miller is a known expert in real estate and mortgage journalism. His writing includes seven books published by Harper & Row, and he is the creator and host of the AOL Real Estate Center. His expertise appears in online outlets like TheMortgageReports.com, showcasing his deep understanding of the financial landscape. A respected voice in media, Peter has been featured in over 1,000 interviews across TV, radio, and print. His educational background, including degrees in journalism, public relations, and government public information from the American University, solidifies his standing as a trusted authority in real estate and finance.