Square adds encryption to its Square reader
The old (unopened) reader is on the left; the new reader is on the right, with encryption and a battery. — Square has added encryption technology to its Square reader. — Competitor VeriFone tried to drum up sentiment against Square …
Context & Ripple Effects
This closes a year-old loop. After VeriFone publicly attacked the original reader's lack of encryption in early 2011, Square committed to a security upgrade — TechCrunch reported in April 2011 that Square would beef up card reader security that summer and conceded VeriFone wasn't so wrong. The encrypted reader with its own battery is that promise delivered, nearly a year late.
The timing matters because Square is expanding on every front at once: days earlier it rebranded Card Case as Pay With Square with merchant discovery features, it posted a strong growth curve despite analyst skepticism about visible adoption, and it is pitching the New York Taxi and Limousine Commission on equipping 50 cabs. A dongle that meets bank-card security standards makes those institutional pitches easier to defend.
First-order effects
- New readers ship with encryption and a built-in battery, directly neutralizing the unencrypted-data vulnerability VeriFone used in its public campaign against Square.
- Merchants already holding the old unopened readers face a hardware transition question — whether Square swaps them or requires new purchases is not addressed in the announcement.
Second-order effects
- VeriFone loses its sharpest competitive wedge against Square; the incumbent payment processor now has to argue on price, service, or enterprise relationships rather than security fear.
- Any other dongle maker still shipping unencrypted audio-jack readers inherits the same criticism VeriFone aimed at Square — encryption becomes table stakes for the whole category.
Third-order effects
- If mobile-payment hardware converges on bank-grade security standards, regulatory-sensitive deployments like the NYC taxi pilot become the template for how startups enter regulated payment venues previously closed to them.
- The reader stops being a cheap plastic accessory and becomes engineered hardware — raising capital barriers that favor funded players like Square over hobbyist clones.
The trend: Mobile card-reader startups are maturing from novelty dongles toward bank-grade payment infrastructure, with incumbents' security attacks accelerating rather than halting the transition.