Ever since Square’s CEO and co-founder Jack Dorsey left Twitter to roll out his mobile payment plug-in device and related software for merchants to accept credit card payments via their mobiles, skeptics and criminals alike have taken heed.
Back in March, when PayPal decided to compete with Square in the mobile merchant space, I noted that "digital wallet are new territory for both the consumer and the business owner," and that there was "a leap of faith in making these types of transactions." Little did I know then, that criminal minds were already at work challenging the boundaries of this new payment channel.
While Gideon Yu, a partner with Khosla Ventures, a venture capital firm that last November lead a $10 million investment in Square feels that while the service addresses a need that is "acute and huge," he also believes that "the minute there is an ability to make payments (on mobile devices), the mafia and hackers are all going to come," and concluded with, "we are scared."
To counteract fraudulent transactions, over the last few months, the company has been building and testing software that flags irregular transactions and can authenticate the identity of credit card users. It has also addressed counter-measures to prevent unauthorized charge-backs and refunds.
But is that enough? Not according to Michael Arrington at TechCrunch who is wondering what percentage of Square’s transactions are for drugs or prostitution. "It can really open up those markets to credit cards," says Arrington.
In questioning Jack Dorsey, Arrington says that while the founder has told him that exactly zero drug or Jack Dorseyprostitution transactions have been completed through Square, "I wonder how he really knows for sure," questions Arrington.
To that point photographer Chris O’Connell and CAS Image Productions have produced a YouTube spoof as to how easy mobile payments could be used to pay for some nefarious activities that challenge Dorsey’s claims that his device is not being compromised.
With Square’s card swipe taking the place of the cumbersome task of applying for "merchant accounts," and the number of steps that are required to complete a transaction, it has also opened the door for anyone to accept credit card payments. And while this is great service for SMB owners and allows them to cut costs, it doesn’t currently have a policing device for those that are going to work the system for illegal means.
If its "hip to be square," it might also require some additional precautionary measures before it attracts a mainstream audience – as I think it has addressed the drug-dealer and prostitution demographic!
