VeriFone Attacks Mobile Credit-Card Processing Company Square

VeriFone, one of the oldest and largest providers of credit card processing systems, has just entered into a very public and very direct confrontation with Square, the new kid in town. In his open letter, VeriFone CEO Doug Bergeron has termed Square's credit card processing device "a skimming machine" that can be hacked by any reasonable programmer within one hour. Bergeron claims that the fault lies in Square's hardware that is poorly designed and lacks the ability to encrypt credit card data. According to Bergeron: The issue is that Square's hardware is poorly constructed and lacks all ability to encrypt consumers' data, creating a window for criminals to turn the device into a skimming machine in a matter of minutes. There are hundreds of thousands of these unsecure devices already floating out there and more are given away for free every day. And because anyone can get their hands on these Square readers, anyone can masquerade as a legitimate business or vendor and swipe your payment card. Your card data is then instantly and illegally captured in the smartphone, un-encrypted - and voila, you're a fraud victim. Consumers who hand over their plastic to merchants using Square devices are unwittingly putting themselves in danger. Bergeron and company didn't stop at that, they went ahead and created a simple application that does exactly what VeriFone states, that is steal credit card data from Square devices. The video of VeriFone's application can be viewed at the end of this post. VeriFone has also sent their "Credit Card Data Skimming App" to a host of financial institutions including Visa, MasterCard, Discover, American Express, and JP Morgan Chase to seek their comments. Square has been getting a lot of traction lately, the mobile credit card processing company founded by Jack Dorsey, closed a $27.5 million funding round back in Jan, 2011 to compete with the big guys like Intuit and VeriFone. Immediately after closing the round, Square decided to waive off the 15 cents per transaction fee and to just live with the 2.75 percentcommission that it charges on each transaction. By waiving the fee, Square was able to go one up against rivals Intuit and VeriFone that charges users 15-17 cents per transaction in addition to pocketing 2.75 percent of the purchase. In a twitter status update sent out last week, Jack Dorsey claimed that Square is now processing $1 million in payments each day. This also means that Square is now generating $27,500 in revenues per day given its 2.75 percent cut per transaction. At such a rate Square is already grossing $10 million in annual revenues, not bad for a startup that was founded two years back. VeriFone is claiming that it was forced to take this step because the credibility of the entire industry was at stake. From the immense hype that Square was generated for the past couple of months, it looks like it was VeriFone's very existence that got on the line. [Credit Card Data Skimming App Video: http://www.youtube.com/watch?v=ObGQxSuORy0]

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VeriFone Attacks Mobile Credit-Card Processing Company Square

Bilal Hameed

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Bilal Hameed