Loyalty Goes Digital: A Look at Square Inc.

Square, a mobile payment start-up, has been getting a lot of squawk lately. And for good reason. Square’s latest innovation has to do with retail customer loyalty. How to attract it, how to enhance it, how to keep it.

The company’s apps now make it possible for shoppers to carry around digital loyalty cards, instead of the old style cards that got punched. You know, buy ten and get one free or at a steeply discounted price. The app that makes this happen is called Pay With Square, and is available for both iPhones and Android-based phones. The upgraded software lets merchants reward faithful customers by applying discounts automatically when they revisit the retail site or by granting points on a digital punch card each time they make a purchase.

According to Square’s COO, Keith Rabois, digital punch cards are more convenient than carrying around a wallet or purse full of paper cards, which, if you’re like most people, you forget and leave at home. Then when you get to the store, you don’t have it when you need it. With Pay With Square, your card is in your phone, one for each merchant.

A number of companies are diving headfirst into the big pool of mobile payment processing. Surprisingly, the technology has been slower to catch on in the U.S. than in Europe and Asia. The problem is that U.S. consumers need to be convinced that mobile payments are as safe and just as handy as cash or plastic credit cards. Another part of the problem is that there are simply too many players in the game. One or two or maybe even three mobile payment systems need to jump ahead of the others and gain general acceptance among consumers, phone makers, carriers, and merchants. In other words, one of the companies has to establish a strong brand identity, one that most people recognize and trust.

Square is trying to do just that. The company is trying to present mobile payments as better, faster, safer, and more convenient than the traditional debit or credit card. Right now, customers can pay with Square at any retail store utilizing Square Register. The merchant’s software automatically recognizes those customers whose phones have Pay With Square, when they walk into the store. After making their selections, all they do is walk up to the register and say their name. That’s it, the transaction is complete.

It’s so simple it’s almost uncanny, which may explain why some people find it difficult to accept. Still, as soon as one company asserts itself and stands out from the rest, that’s when the technology will take off.