App-driven life: How to pay by phone with Square Wallet

Square Wallet lets you leave your real wallet at home when you go shopping. Square Wallet knows when you're in a store and gives the clerk permission to make a charge to your account. 

Ann Hermes
Girl Scout Christine MacLeod scans a credit card with a mobile phone while selling cookies at Harvard Square, in Cambridge, Mass.

Small shops, artisans, and cookie-toting Girl Scout troops have used Square credit-card readers for a few years now. The magnetic readers plug into smart phones and tablets, giving merchants an easy and mobile way to accept credit cards. But Square has bigger plans.

It imagines using people's smart phones as fingerprints. When customers walk into a shop, their phone will wirelessly "announce" their presence. The cash register will know their name, face, and preferred payment method. When the shoppers approach the cashier, they can charge their purchase to the credit card on file simply by saying their name. The salesclerk checks the profile photo to make sure that it matches the person there, and can then approve the transaction. No wallet or signature required.

This vision of the future already exists. Shoppers can set up a profile through the free Square Wallet application, and, according to Square, use it at any of 75,000 merchants. Since smart phones come with GPS tracking chips, transactions can only be carried out when the person – or at least the phone – is in the store.

Needless to say, Square Wallet raises all kinds of questions about security and privacy. Square's biggest hurdle has been convincing shoppers to embrace this rather sci-fi scheme. But the system received a major vote of confidence in August when coffee megachain Starbucks bought a $25 million stake in the mobile-credit start-up and its chief executive officer, Howard Schultz, joined the Square board of directors. Around 7,000 Starbucks shops now use Square's software to handle credit and debit transactions – but customers have to scan their phones, at least for now.

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