PCI-Less Card Payments: Square’s Mobile Scheme

Written by Evan Schuman
May 25th, 2011

A new Square mobile POS offering introduced on Monday (May 23) quietly delivers something that many vendors have falsely promised but never delivered: Absolute escape from PCI rules. Yes, the much-promised-but-never-realized claim of PCI out-of-scope actually does exist within the Square offering.

It enables a retailer’s customers to pay with Visa (a key backer of Square), MasterCard or American Express without having to abide by any PCI restrictions. And, yes, there are a few (admittedly major) limitations, but the exclusion appears quite real.

When you push all rhetoric aside, PCI in-scope simply comes down to this: If a customer hands a payment card to any of a retailer’s employees/contractors—or swipes or waves the card into a device inside or controlled by a retailer or types the information on that card into a Web site branded and controlled by a retailer—that retailer is subject to PCI. If the customer doesn’t, the retailer isn’t. Even a token doesn’t get the retailer out-of-scope, because a vendor has the ability to match that token to the actual card number. As long as that capability exists, that token must be protected as though it were the card number.

What Square’s new approach, dubbed Card Case, does is fully take the retailer out of the line of fire of the card information. In effect, Square acts as the retailer. The system has the card data going from the consumer to Square, which interacts with the processor. Even the charge that appears on the customer’s bank statement says “Square.” (That’s something we confirmed Tuesday [May 24] with one of the 50 test retailers that started trialing the service the day before.)

Here’s how Square Card Case is supposed to work. There are two hardware elements: The consumer side (typically using an iPhone) and the retailer side (typically using an iPad). Consumers need to download the Square app and complete a one-time-only registration, where they provide their information, including payment-card data, and upload a photograph of themselves.

After the registration has been completed and accepted, the app will list participating retailers in the vicinity of the phone, along with a list of what that merchant is selling. If interested, a consumer selects a retailer, which causes a message to be sent to that retailer to expect that specific consumer. That consumer’s name and picture will be displayed on the merchant’s iPad.

When the consumer shows up, he/she can make a purchase by going to a store associate at the checkout area and “paying” for the item by simply saying his/her name and that he/she is using Square Card Case. The associate looks at the iPad app and matches the consumer’s name with the name and picture on the screen. If it matches, the associate simply enters in the amount of the purchase and executes it.


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