Cash, Jack, Square, St. Louis and life in cities

As I’ve written before, how we live in cities changes because of technology.  The streetcar allowed cities to physically grow outward and the automobile took cities further and further outward.  The mobile phone has allowed us to be away from a land line.  The phone booth has disappeared. The notebook and wi-fi has moved the office to the corner coffeehouse.

Cities exist as a place to exchange goods and services. St. Louis, for example, started in 1764 as a place to trade fur.  Currency is exchanged for goods and services.  In St. Louis that currency has been Spanish, French and American.  The bills and coins have changed since the mid 18th Century.

Today we often use a debit or credit card rather than cash.  I have coins for the purposes of feeding our 20th century parking meters.  Newer vending machines often take plastic.  Cash is on the way out with other paper items, like newspapers.

Enter Jack.  St. Louis native and founder of Twitter, Jack Dorsey.  Jack hates cash so he started Square to allow people to easily accept plastic with their mobile phone, initially the iPhone (and iPod Touch). The national press covered the start-up announcement last week.

According to Square’s website, payees can start accepting payments via Square in under 60 seconds, with “no contracts, monthly fees, or hidden costs.” The company donates one cent from every transaction to the charity of the payer’s choice. In order to streamline the process, payees can register for Square and upload a photo, so that payees can verify that you are who you say you are.

It’s not yet clear how Square’s transaction fees will square with those of traditional merchant accounts. “We’re not giving out rate sheets just yet, as they are in flux until we have a general launch,” Dorsey told wired.com via e-mail. “When we do though, the fees will be completely transparent, simple and upfront.”

In order to accept credit card payment using Square’s iPhone app, a merchant attaches a card-reading dongle to the smartphone’s audio input – or “any device with an audio input jack.” Once the customer signs the phone with their finger, the transaction is complete, after which the app can e-mail a receipt to the customer.  (Full story: Wired)

The initial debut is limited at first but it will open up in 2010.  Articles mention two of the three cities that have vendors using the new system: San Francisco and New York.  Sure, lots of new technology comes from these cities.  But what about that third city where this new cutting edge technology is available?  Seattle? Nope.  Denver? Chicago?  Getting warmer.  Try St. Louis:

Dorsey partnered with Jim McKelvey, president of Mira Digital Publishing and founder of Third Degree Glass Factory in St. Louis, on the new San Francisco-based company, which also has offices in St. Louis and New York.

Dorsey, 32 is chief executive of the new company, which has rolled out service at select locations, including Third Degree Glass Factory in St. Louis and other businesses in San Francisco and New York, McKelvey said. The company plans to introduce the service to everyone in early 2010, according to a statement on its Web site, squareup.com, which lists 11 staff members. McKelvey said it wasn’t yet known how many local employees the company would have.

The inspiration for Square came in February, when McKelvey could not sell a piece of his glass art to a customer in Panama because he couldn’t take her American Express credit card for payment. “I was complaining to my friend, Jack, about this,” McKelvey said. “It should have been possible but wasn’t.” (Full story: St. Louis Business Journal)

Square will change retailing, cities and the business of exchanging money. PayPal was started by eBay as a way to facilitate payment of auction items but now PayPal represents a big portion of eBay’s total revenues.  Revenues are measured in billions, not millions.  Google has Google Checkout.  Apple licenses a technology from Amazon to process millions of small micro-payments.

The traditional brick and mortar retailer has been stuck with with a card reader connected to a land line, if they could justify the fees.  For the street vendor, farmer at a farmers’ market, artist at a street fair or others seeking payment Square will be a huge.

The mobile app is expected to sell for 99¢, the dongle will be free.  The fee rate will be very straightforward. This will permit those people who do business away from a card reader they will be able to accept plastic.

I think that this is truly disruptive. The reason Square exists is because of three macro trends: the pervasiveness of the mobile Internet, the increase in the use of electronic payment systems and most importantly, the availability of low-cost, always-on computers (aka smartphones) that allow sophisticated software to conduct complex tasks on the go.

The marriage of computing and connectivity without the shackles of being tethered to a location is one of the biggest disruptive forces of modern times. It is (and will continue) to redefine business models, for decades. Square is simply riding these waves.

There is no denying that the challenges facing Square are many. But the simplicity of the idea, the audacity of the company’s dream and the convergence of diverse technology trends make Square a company to watch.  (Full commentary: Gigaom)

The changes won’t be apparent in say April 2010.  By April 2020? Yes. Business licenses are typically linked to a physical address, a place of business.  As technology changes the address the Secretary of State keeps on file may just be where your business receives snail mail.  Actual transactions may take place miles away from that address.

Retail stores are not going to go away.  In fact technology such as this could help retailers have more than one point-of-sale location — such as one facing the urban sidewalk out front and one facing a rear parking lot entrance.  Apple is using a new system in their stores that includes bar code reader and other features for large volume sales.

Yesterday VeriFone decided it needed to provide a mobile option for it’s service:

The PAYware app and device, which plugs into the iPod dock connector and cradles the phone, is free when users sign a two-year contract.

Along the lines of a cellphone contract, users pay an activation fee of $49, a monthly fee of $15 and 17 cents on each transaction.

The subscription model makes it an unrealistic option for the casual Craigslist seller, which Dorsey pegged as his target market. Indeed, VeriFone is going after cafes (as is Square), home repair and door-to-door salespeople.  (Source: Los Angeles Times)

Unlike Square, the Verifone solution is specific to the iPhone and iPod Touch. Mobile credit/debit card acceptance will be huge.

– Steve Patterson

Downsizing American’s taste for automobiles

Longer, wider, bigger has been the automotive trend for decades.  Same with increased luxuries.  Tata Motors has bucked industry trends by introducing the world’s cheapest car, the Nano.  The base Nano, made in India, sells for the equivalent of less than $2,500.  Yes, under $2,500!  Before you dismiss the Nano, Tata Motors also makes Jaguar and Land Rover vehicles.

With a starting price of only 100,000 rupees ($2,150), the Tata Nano is the cheapest car money can buy. Already a huge hit in its native India, where it went on sale earlier this year, the Nano could soon be coming to Europe and North America. Ratan Tata, chairman of the Tata Group and Tata Motors, has said exports of the Nano are planned for Western markets within the next 2-3 years. (full story)

A hybrid model is planned but that will drive up the cost.

So will this car take off in North America?  It looks like a cute toy.  Like many toys this car uses a lot of plastics.  The Nano has already passed numerous European safety requirements.  This is not the car for highway driving but work and groceries? Sure, why not.  Tata isn’t going to cannibalize sales of Jaguars but a few transit dependent riders might become owners if they live in a place where they can afford to park it.

The private automobile is not going away from American cities but I do like the idea of more Americans buying smaller, cheaper & basic cars.

– Steve Patterson

Diverse populations celebrate diverse holidays

Thanksgiving to New Year’s Day is the holiday season in North America.  For most this time includes Christmas.  For the rest of us we often celebrate another holiday, such as Kwanzaa or Hanukkah.  We have a diverse population in St. Louis so I’m curious to see how diverse my readers are so the poll this week asks what holiday you celebrate in December.

I was going to randomize the answers but I decided to list Christmas twice so I needed to make sure everyone saw that before answering.  Twice? One is for the birth of Jesus and the other is because it is December 25th.  Get the difference?  I have never once celebrated the birth of Jesus but I have celebrated Christmas because it is December 25th. I’ve included an “other” option this week.

Personally speaking I know how awkward it is when you are wished a merry holiday you don’t celebrate. I’d like store clerks and others to say “Happy Holidays” than make presumptions about what, if any, holiday I might celebrate. Naturally “Happy Holidays” instead of “Merry Christmas” is controversial:

The American Family Association is calling on consumers to boycott Gap Inc. and its brands, which include Gap, Old Navy and Banana Republic, this holiday season. The Christian organization alleges that the retailer’s ads downplay the word “Christmas.”

The boycott, according to the AFA, is in response to Gap’s holiday advertising and in-store promotions over the years, which have stayed away from recognizing any specific religion. For instance, last year’s campaign was themed “Merry Gap-mas,” substituting the chain’s name for Christ’s. The AFA—which had boycotted other retailers like Sears and Target in the past for their holiday ads—is singling out Gap this year. The AFA is planning to release a “Naughty and Nice” list of retailers who address Christmas and those who don’t.  (Source: Brandweek)

Below is Gap’s 2009 holiday commercial the AFA doesn’t like:

httpv://www.youtube.com/watch?v=oVMPWlWDvsI

I took the AFA poll:

Since Gap has now included the word “Christmas” in a television ad (in a dismissive manner), should AFA call off the boycott of their stores?

• Yes. Any reference to Christmas is good enough to me. 5,267
• No. Gap has taken a disrespectful attitude towards Christians with its ad. 47,935

The 2009 AFA “Naughty and Nice” list is here.  I personally celebrate retailers that don’t push one religion at the exclusion of others so I’ll use their list in the reverse of how they intended. You may agree or you may not.  Share your thoughts below and vote in the poll in the upper right corner.

Happy Holidays everyone!

– Steve Patterson

You can always go downtown

45 years years ago, November 1964, Patula Clark released Downtown:

httpv://www.youtube.com/watch?v=yHNGvEdTwBQ

In January 1965 the song made it to #1 in the United States.  This was a time that downtown needed a positive image.

Linger on the sidewalks where the neon signs are pretty

Except that sign laws in many cities made these great signs disappear — they were visual “clutter.”  Very glad to see the projecting blade sign make a return.  Although in St. Louis you must jump through hoops to have one.

This classic song has been covered by many artists, I’m fond of the B-52s version.

– Steve Patterson

Technology has changed public sidewalks

Remember the corner phone booth?

I can’t remember the last time I saw one much less the last time I used one.   As mobile phones have become commonplace, the once ubiquitous pay phone has disappeared.

Teenagers have previously lagged behind adults in their ownership of cell phones, but several years of survey data collected by the Pew Internet & American Life Project show that those ages 12-17 are closing the gap in cell phone ownership. The Project first began surveying teenagers about their mobile phones in its 2004 Teens and Parents project when a survey showed that 45% of teens had a cell phone. Since that time, mobile phone use has climbed steadily among teens ages 12 to 17 – to 63% in fall of 2006 to 71% in early 2008.

In comparison, 77% of all adults (and 88% of parents) had a cell phone or other mobile device at a similar point in 2008. Cell phone ownership among adults has since risen to 85%, based on the results of our most recent tracking survey of adults conducted in April 2009. The Project is currently conducting a survey of teens and their parents and will be releasing the new figures in early 2010.  (Source: Pew Internet)

Mobile phones are everywhere and the pay phone is not.  Not a bad thing if you are in the 85% of adults that has one but it probably sucks if you don’t have a mobile.

Today “smart phones” are becoming increasingly popular.  Before I got an iPhone in January 2008 I had the cheapest, most basic phone possible but now I can’t imagine life without it.

My poll this week asks the operating system your phone uses.  You may not know but give it a shot.

– Steve Patterson