Square, the iPhone Payment System launched by Twitter’s Jack Dorsey, officially launched last week. Its Web site is now live, and Dorsey gave interviews with TechCrunch and the Los Angeles Times. Now, the question remains – is the hype real, and will Dorsey have his second successful business?

As I mentioned back in October, the concept of mobile payment solutions is a highly competitive and trending issue in the financial industry. However, the premise of Square seems off-based and highly ineffective. Mobile payments is in its infancy stage, so why would someone limit themselves by focusing solely on one mobile device? It’s understandable that you have to start somewhere, but is Dorsey and Square trying to be too trendy? Some may argue that aligning yourself with Apple and the iPhone is a smart marketing strategy. I would beg to differ. Technology within the financial industry is a beast in itself. The technology is in its infancy, worldwide adoption is still years away. So why limit yourself even further by focusing on the iPhone?

MobileBanker, by American Banker, had a post today taking a similar stance with Square. In the article, Daniel Wolfe suggested that Square appears to be more flash than substance. He argued that it appears that Dorsey may be more interested in the buzz than that actual business details – most notable, whether or not it adheres to Payment Card Industry Data Security Standard – which could ultimately be a deciding factor in whether or not MasterCard and Visa accept that product.

Aaron McPherson, a research manager for payments at the Framingham, Mass., research firm IDC Financial Insights, said he took issue with the Web site’s promise that the Square device could be used to process payments without having a merchant contract.

“Without any contract, how do you know that the money is going into your bank account?” he said. Further, using such a system without a firm relationship with the vendor is likely against the card brands’ bylaws, he said. “Mastercard and Visa won’t let you do it.”

I appreciate Dorsey’s continued focus on convenience and innovation, however, the financial industry is a completely different beast than the tech space. While tech is about creation and stepping outside the box, a large portion of the financial industry is stuck with familiarity. The financial industry continues to focus on innovative ways to bring banking to its consumers. While the large portion of institutions are struggle to keep up with the mobile trend, payment solutions is a space that continues to get a lot of attention and focus.

Again, I applaud the effort. I think the concept is brave. However, there simply remains too many hurdles and variables that are going to get into the way of Square. My personal opinion is that a) an increase adoption of mobile payment processing is still 3-5 years away and b) focusing on one mobile device is a poor strategy.

We’ve just recently gotten over the fear of online banking and we’re just now seeing the true ROI of e-commerce. I understand the attempt and importance of being the first player to the game. You can’t replace the original. However, I don’t see Square finding much success in the payment processing space. Unfortunately, I don’t think lighting will strike twice for Dorsey.

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