4 ms·

I've always wondered - why was it so easy to replicate Square's scanning device? Seems like about 6 months after they really started gaining traction, PayPal ca

I've always wondered - why was it so easy to replicate Square's scanning device? Seems like about 6 months after they really started gaining traction, PayPal came out with their copycat triangle one, and then a cascade of copycats. It went from not being a thing to there being tons of them overnight. I would imagine there would be somewhat of a barrier to entry, but it seems it's a fairly easy device to create?

chasing 11y ago
There are magnetic stripe readers everywhere -- I can't imagine they're that hard or expensive to produce.
- therein 11y ago
  I don't imagine they are as straightforward as buying a magnetic reader and putting it in a shell. The interface is somewhat unique after all. It connects through the audio jack. The processing on the software side need to be somewhat custom as well.
  - Johnie 11y ago
    Yup, it's as simple as putting a magnetic stripe reader and putting it into a shell. These are a commodity on Alibaba now [1]. The idea of using headphone jack for data transfer has been around since the Commodore PCs [2] The software side is pretty standard too [3]. It's a standard analog to digital conversion. [1] http://www.alibaba.com/showroom/headphone-jack-magnetic-card-reader.html http://www.alibaba.com/showroom/headphone-jack-magnetic-card... [2] http://www.zimmers.net/anonftp/pub/cbm/crossplatform/transfer/transfer.html#wire-tape-audio http://www.zimmers.net/anonftp/pub/cbm/crossplatform/transfe... And https://en.wikipedia.org/wiki/Commodore_Datasette https://en.wikipedia.org/wiki/Commodore_Datasette [3] http://www.slideshare.net/ShipengXu/data-transmission-through-audio-jack-on-ios http://www.slideshare.net/ShipengXu/data-transmission-throug...
    - nathancahill 11y ago
      Yeah, a buddy of mine built on from parts at a hackathon on a weekend. Really straight forward.
  - striking 11y ago
    No, that's exactly what they do. They pipe audio track data through your mic port, like any other reader would. Although they did start encrypting the signal, because people started using these cheap readers for nefarious things.
deleted 11y ago
[deleted]
calcsam 11y ago
"The Shakespearean model holds true today. Consider the Square card reader. Square was the first company to do mobile handset credit card processing right. It did the software piece and the hardware piece, and built a brand with the iconic white square device. Then there was a proliferation of copycat readers. PayPal launched one. They shaped it like a triangle. They basically copied the idea of a simple geometric-shaped reader. But they tried to one-up Square; 3 sides, after all, was simpler than 4. Before PayPal’s PR people could celebrate their victory, Intuit came out with a competing card reader. It was shaped like a cylinder. Then Kudos came out with its version, which it shaped like a semicircle. Maybe someone will release a trapezoid version soon. Maybe then they’ll run out of shapes. How will this all end? Do you really want to get involved in making a new card reader at this point? One gets a distinct sense that the companies focused on copycat readers are in a great deal of trouble. Much better to be the original card reader and stay focused on original problems, or an original company in another space entirely." - Peter Thiel, http://blakemasters.com/post/23250566538/peter-thiels-cs183-startup-class-12-notes http://blakemasters.com/post/23250566538/peter-thiels-cs183-...
- kethinov 11y ago
  Intuit's actually predates both Square's and PayPal's: http://venturebeat.com/2009/05/21/intuit-gopayment-lets-you-process-credit-cards-on-your-phone/ http://venturebeat.com/2009/05/21/intuit-gopayment-lets-you-...
  - pbreit 11y ago
    That article just says you type in the credit card number into a web page. Very different.
    - kethinov 11y ago
      From the article: "and you can also purchase a card scanner (so you don’t have to type the number in)."
- throwaway2048 11y ago
  This arguement only makes sense if Shakespeare became wealthy, especially in porportion to his fame. Seeing as we know so little about the man, its impossible to say. Its easy to be a household name and flat broke. Ask all the washed up movie and rockstars about that. There is of course an amusing "rageingly out of control costs" paralell to startups there. An additional irony is the claims that Shakespeare was a plagurist...
pbreit 11y ago
Which is why Square's growth has been so impressive. It totally dominates the "dongle" market despite, as you note, the ease in copying it by well-resourced competitors.
- jonknee 11y ago
  Square is also subsidizing massive numbers of small transactions, something that is much more difficult to compete with (who wants to compete with someone willing to lose huge sums of money?).
jes5199 11y ago
The first generation Square readers were basically the read head from a tape recorder soldered to an audio plug. All of the signal processing was done in software, and even that was pretty simple - magstripes are low bit-density binary, after all. The readers were simple enough that they made the first few hundred by hand, in San Francisco. Once they started mass producing them they were dirt cheap. Gradually that's changed, though. Pressure from the credit card industry and other payment processors forced Square to start encrypting the magstripe data so that malware on smartphones wouldn't have access to the card numbers (I don't know whether this is a legitimate concern, but the pressure was strong). So Square started putting integrated circuits (and batteries!) into the readers. Now, with the chip readers coming out, they're starting to be seriously complicated hardware.

chasing 11y ago

There are magnetic stripe readers everywhere -- I can't imagine they're that hard or expensive to produce.

therein 11y ago
I don't imagine they are as straightforward as buying a magnetic reader and putting it in a shell. The interface is somewhat unique after all. It connects through the audio jack. The processing on the software side need to be somewhat custom as well.
- Johnie 11y ago
  Yup, it's as simple as putting a magnetic stripe reader and putting it into a shell. These are a commodity on Alibaba now [1]. The idea of using headphone jack for data transfer has been around since the Commodore PCs [2] The software side is pretty standard too [3]. It's a standard analog to digital conversion. [1] http://www.alibaba.com/showroom/headphone-jack-magnetic-card-reader.html http://www.alibaba.com/showroom/headphone-jack-magnetic-card... [2] http://www.zimmers.net/anonftp/pub/cbm/crossplatform/transfer/transfer.html#wire-tape-audio http://www.zimmers.net/anonftp/pub/cbm/crossplatform/transfe... And https://en.wikipedia.org/wiki/Commodore_Datasette https://en.wikipedia.org/wiki/Commodore_Datasette [3] http://www.slideshare.net/ShipengXu/data-transmission-through-audio-jack-on-ios http://www.slideshare.net/ShipengXu/data-transmission-throug...
  - nathancahill 11y ago
    Yeah, a buddy of mine built on from parts at a hackathon on a weekend. Really straight forward.
- striking 11y ago
  No, that's exactly what they do. They pipe audio track data through your mic port, like any other reader would. Although they did start encrypting the signal, because people started using these cheap readers for nefarious things.

deleted 11y ago

[deleted]

calcsam 11y ago

"The Shakespearean model holds true today. Consider the Square card reader. Square was the first company to do mobile handset credit card processing right. It did the software piece and the hardware piece, and built a brand with the iconic white square device. Then there was a proliferation of copycat readers. PayPal launched one. They shaped it like a triangle. They basically copied the idea of a simple geometric-shaped reader. But they tried to one-up Square; 3 sides, after all, was simpler than 4. Before PayPal’s PR people could celebrate their victory, Intuit came out with a competing card reader. It was shaped like a cylinder. Then Kudos came out with its version, which it shaped like a semicircle. Maybe someone will release a trapezoid version soon. Maybe then they’ll run out of shapes. How will this all end? Do you really want to get involved in making a new card reader at this point? One gets a distinct sense that the companies focused on copycat readers are in a great deal of trouble. Much better to be the original card reader and stay focused on original problems, or an original company in another space entirely." - Peter Thiel, http://blakemasters.com/post/23250566538/peter-thiels-cs183-startup-class-12-notes http://blakemasters.com/post/23250566538/peter-thiels-cs183-...

kethinov 11y ago
Intuit's actually predates both Square's and PayPal's: http://venturebeat.com/2009/05/21/intuit-gopayment-lets-you-process-credit-cards-on-your-phone/ http://venturebeat.com/2009/05/21/intuit-gopayment-lets-you-...
- pbreit 11y ago
  That article just says you type in the credit card number into a web page. Very different.
  - kethinov 11y ago
    From the article: "and you can also purchase a card scanner (so you don’t have to type the number in)."
throwaway2048 11y ago
This arguement only makes sense if Shakespeare became wealthy, especially in porportion to his fame. Seeing as we know so little about the man, its impossible to say. Its easy to be a household name and flat broke. Ask all the washed up movie and rockstars about that. There is of course an amusing "rageingly out of control costs" paralell to startups there. An additional irony is the claims that Shakespeare was a plagurist...

pbreit 11y ago

Which is why Square's growth has been so impressive. It totally dominates the "dongle" market despite, as you note, the ease in copying it by well-resourced competitors.

jonknee 11y ago
Square is also subsidizing massive numbers of small transactions, something that is much more difficult to compete with (who wants to compete with someone willing to lose huge sums of money?).

jes5199 11y ago

The first generation Square readers were basically the read head from a tape recorder soldered to an audio plug. All of the signal processing was done in software, and even that was pretty simple - magstripes are low bit-density binary, after all. The readers were simple enough that they made the first few hundred by hand, in San Francisco. Once they started mass producing them they were dirt cheap. Gradually that's changed, though. Pressure from the credit card industry and other payment processors forced Square to start encrypting the magstripe data so that malware on smartphones wouldn't have access to the card numbers (I don't know whether this is a legitimate concern, but the pressure was strong). So Square started putting integrated circuits (and batteries!) into the readers. Now, with the chip readers coming out, they're starting to be seriously complicated hardware.