Square Eschews Free, Starts $29 Pre-Orders For Chip-Based Card Readers

Mobile payments company Square is today kicking off pre-orders for its new chip-based card readers, which were first announced earlier this year and intended to replace the current devices that read cards’ magnetic stripes. The mobile dongle version will sell for $29 and a table-top version will cost $39 — a departure for the company not just in terms of technology but also cost: the old mag-stripe dongles were free.

The new devices will ship “early next year,” Square says.

It’s definitely not the first mover to the market, but Square is taking a page from Apple’s book and banking on being the most elegant. “The chip card readers out there now aren’t ideal for small sellers,” the company says in its blog post. “They cost hundreds of dollars and are big, clunky, and power hungry. Not the type of thing you want to carry around.”

The reader is compatible with iOS and Android devices, processes both magnetic-stripe and chip cards and is “extremely energy efficient” — capable of managing a whole day of sales on one charge.

As you can see in the illustration, the new reader looks very similar to the old one — the difference being that it reads the microchip that is embedded in the card instead of the mag stripe. This is to help Square stay current with regulations that will require card issuers to switch to EMV-based chip-and-pin services, which are considered more secure than mag-stripes. The deadline for the switchover is October 2015 in the U.S.

The fact that Square is charging for the devices is interesting. On one hand, this is likely related to some of the cost of producing these. In Europe, where chip-based card reading mobile-dongles have been on the market for years already, companies like iZettle, Payleven and PayPal that offer them have also been charging.

On the other hand, it also speaks to Square’s own strategy. The company has to date raised just under $600 million, but with its business model based around getting a very small cut on each transaction, and a lot of fierce competition that requires Square to spend a lot of money on marketing and business development, the margins are likely not that great.

Charging for this hardware could help Square improve that somewhat.

The presence of a chip reader also brings up another point: it means that Square will now, finally, be able to come into new markets like Europe, where a mobile payments company is required to accept chip-based transactions in order to work with companies like Visa.

Square has not yet commented on what its plans are for this region and others, but again in a business that is based around scale, this is likely to be an opportunity that it will tap.

On top of the dongle for $29, Square is also offering a table-top reader for $39 that will link up to its Square Stand and offer a more traditional set-up for making transactions. That’s pictured here:

A9 Pre Order Stand