Original URL: http://www.theregister.co.uk/2011/03/10/verifone_square/
VeriFone ramps up the fear factor
Apparently it's far from hip to be Square
Payment processor VeriFone has launched a blistering attack on newcomer Square, claiming Square's hardware opens the way for criminals to skim cards – without noting that such skimming is already commonplace.
So concerned is VeriFone with your security that it has set up a special website explaining what Square is doing wrong, and demanding that the upstart immediately recall all its issued readers. That would obviously drive Square out of business, no doubt to the enormous distress of VeriFone.
Square was set up at the tail end if 2009 by the co-founder of Twitter Jack Dorsey, with the promise of bringing electronic payments to the iPhone - enough buzz words to raise $10m from venture capitalists though it was towards the end of last year the company finally launched with a plastic cube that could be perched on top of an iPhone to read magnetic stripes. Square reckons it's now handling a million dollars a day though those little boxes, though last month it still decided to cut its prices significantly to speed up adoption.
It's the plastic cube that has attracted VeriFone's ire, as it lacks security measures that would prevent a thief reading the credit card number from the phone's memory. But that doesn't necessarily lead to the kind of fraud that VeriFone suggests in their helpful video.
The magnetic stripe on a credit card is just a bit of audio tape; you can read and write them using kit available from a multitude of suppliers, and cheaply too – around 50 quid for a basic reader. VeriFone makes much of the fact that Square is providing the readers free to anyone, but when you can pick up such a thing (and a writer to make copies) so cheaply that's hardly important.
Even if someone copies your card they can't rush out and "buy a big screen TV, online, in your name" as VeriFone suggests they will. To do that, your thief will need the CSC (three digit) code from the back of the card (which isn't on the strip), and a disposable delivery address if he's not to get caught, not to mention the password if you're using a modern credit card.
It's true that Square has cut corners by neglecting proper encryption. It's difficult to encrypt things in a reader that's only connected to a smartphone over an audio jack – Roam Data manages it, but Roam Data doesn't give away its readers for free (though Intuit will provide one if you sign up to its Square competitor). Encryption on the reader is a good thing, but to suggest that by neglecting it Square is going to trigger the collapse of banking security is going way too far.
Which begs the question of why VeriFone is making such a fuss about the whole thing? Square is giving away something that anyone can buy anyway, no matter how VeriFone's CEO insinuates the idea that Square "has lost complete control of the credit card dongles", and that this is inherently dangerous. The video, and website, is supposed to make us think Square and its founders are recklessly endangering our security, but in fact it makes us think that Square has got VeriFone properly worried about its market. ®