No credit cards needed, just say your name

Square, the mobile payments start-up, has tried to make cash obsolete by offering a way for any business, from a farm stand to a restaurant, to turn their phones or tablets into credit card terminals. Now Square is trying to make wallets obsolete, too, by upending the way that consumers pay for things.

On Monday, Square announced a way for shoppers to pay by simply giving their name to the merchant -- as in, "charge it to Jack." With two new apps, Card Case for consumers and Register for merchants, Square wants to be involved in every step of the transaction process by replacing cash registers, loyalty cards and paper receipts.

Keith Rabois, Square's chief operating officer, said in an interview that the company's goal is to make cash registers and point-of-sale terminals obsolete, along with the companies that make them, like Verifone. Square is also taking on the many start-ups (from Shopkick to Foursquare to Loopt) that help merchants track who comes to their stores and reward them for their loyalty, and is competing with Google, Apple, PayPal and others to provide mobile payments.

"A lot of people working in this space are concerned with the parts of transactions -- coupons, receipts, waving your phone around in front of a terminal and wait until you hear a beep," said Jack Dorsey, Square's chief executive who is also a Twitter founder. "We think it should be one system."

Square's new payment services are available at 50 merchants in New York, San Francisco, Washington, St. Louis and Los Angeles. With the Register app, merchants can appeal to nearby shoppers who have the Card Case app by posting their menus or inventory listings, adding specials or removing out-of-stock items. They can also store receipts digitally and track customer behavior so they can easily see how many people order scones with their coffee, for instance.

Big merchants like Wal-Mart and Safeway already track these things, but it's harder for small businesses. "Our goal is first to get rid of paper, then offer insights into customers, then help them provide their buyers with better experience," Mr. Rabois said.

With the Card Case app, shoppers can see an edited directory of Square merchants nearby, chosen by Square. If shoppers who are registered with Square open the Card Case app within about two blocks of a store, the merchant knows they are nearby and can see their past orders so they can offer them their favorite espresso drink or send a coupon.

When it comes time to pay, the shopper opens the Square Card Case app, which looks like a brown leather wallet full of cards for stores nearby. The shopper clicks to open a tab at a store and then gives the merchant his or her name. The shopper's credit card number is already stored with Square, and the merchant sees a list of shoppers who have recently opened tabs nearby and chooses the person's name. Merchants see a big photo of the Square user so they can confirm it is the same person.

It is one thing to ask your local bartender to add a drink to your longstanding tab. It is another to trust a company with your credit card information when all it takes to pay is a name, not the actual card.

Mr. Rabois said that the photos and the fact that people can only pay if they and their phones are physically nearby adds a level of protection. For purchases more than $50, shoppers also have to enter a PIN. Mr. Dorsey compared it to Amazon.com and Apple's iTunes store, both of which store credit card numbers so people can make purchases with their e-mail address and password.

Still, a conniving shopper could give someone else's name, and a lazy merchant could fail to verify the photo and charge the purchase to the wrong person. Mr. Rabois called that scenario "conceivably possible, though highly unlikely," and noted that the same thing can happen with physical cards, when a bartender inadvertently charges the wrong card for a tab, for instance.

Square's new payments service would be most convenient if it actually let people leave their wallets at home, and that would only happen if enough businesses use Square. Most shoppers have never encountered a merchant using Square. The service is growing, though. The company said Monday that it had shipped 500,000 credit card readers, which attach to phones and tablets, and is on track to process a million transactions in May and billions of dollars this year.

Square joins a host of companies, from Apple, Google and PayPal to phone carriers, banks and credit card issuers, that are all trying to replace wallets by letting people use their phones to pay, though most of the efforts are in the early stages. While Square has people give their names to merchants, most of the others plan to use a technology called near-field communication, or N.F.C., through which phones communicate information like credit card numbers to the merchants.

"We believe that this is a better and more compelling experience for both buyers and sellers that N.F.C. lacks," Mr. Rabois said, because N.F.C. requires extra steps like waving a phone and does not necessarily incorporate features like menus.

Initially, the company most in Square's sights is Verifone, whose point-of-sale terminals and software are in 70 percent of businesses in the United States. In an earlier interview, Doug Bergeron, Verifone's chief executive, said Verifone was not threatened by Square.

"If you believe, as I believe, that the world is going toward N.F.C., it will render that little plastic dongle meaningless," he said, referring to the Square device that merchants plug into their iPads, iPhones or Android devices to accept credit cards.

And for now, he said, Square is only a competitor in payments between two people. Mr. Bergeron said he thought this was because of security concerns.

"Where your babysitter might want to accept $15, she's probably less likely to care about security and accept more than a few transactions a week," Mr. Bergeron said. "If you're only doing a couple transactions a week, I'd go with Square too, because how much damage can hacking into a babysitter's account really do?"