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VeriFone announced today that it has developed a mobile payment card reader designed specifically for the iPhone.

Initially, the card reader will be shipped to current VeriFone merchants in January, and will also sell the service directly and through third-party organizations. Independent sellers and acquirers will have their own pricing.

Two weeks ago, Twitter’s Jack Dorsey announced the launch of Square – see post below. While I was critical of Square’s approach, I see VeriFone’s entrance a bit more strategic and viable. While Dorsey has the hype and media buzz of Twitter, VeriFone has the credibility and established business. I’d take credibility and an established network over hype any day of the week. Additionally, the platform already complies with the Payment Card Industry Security Council’s Payment Security Standard – a feature that Square has yet to obtain and may ultimately be their biggest hurdle.

VeriFone will require merchants to use its Payware Mobile payment gateway, which processes transactions through First Data Corp, although it will be available through other processors. Price wise, it appears to be competitive. Existing merchant will pay a $15 monthly fee, a one-time fee to use Payware and then a per transaction fee of  17 cents.

Representatives indicated that they will begin to develop a similar platform for other mobile devices such as the Research In Motion’s BlackBerry and Google’s Android devices.

Ultimately, this serves as an immediate and viable threat to Square. I’ve said before that the biggest hurdle in the mobile payment space is the adoption process amongst consumers. It is my belief that in order to make significant progress in mobile payments, you need to have the resources, and more importantly, brand name of a large financial organization – or at least partner with one. This move by VeriFone is a wake-up call for large financial institutions and service companies, as the space finally has a credible player.