Turning a phone into a credit card reader no longer seems like anything special. Square Inc., facing increasing competition from bigger rivals, is adding features to its small plastic card reader to make it a more fleshed-out product for merchants.

Square’s selling point always has been its simplicity, though that may make it look bland in comparison to more full-featured rivals. Intuit’s GoPayment, for example, enables users to calculate local sales tax based on a phone’s GPS signal. PayPal’s Here, another competitor to Square, can scan credit card details using just a phone’s camera.

Square’s most recent addition beefs up the capabilities of Register, an iPad app the company markets as an alternative to using a cash register. The newest update, announced June 19, adds loyalty features such as a virtual punch card. Those features are also accessible by consumers that use Square’s digital wallet, Pay with Square.

“What Square is trying to do is deepen relationships with its merchant community,” Zil Bareisis, a senior analyst for the research firm Celent, said in an email. “That’s the main purpose of the Register app as well as the new loyalty features.”

Square is not alone in its approach. “This trend [of] getting closer to the merchants is also evident from PayPal’s strategy,” he wrote. “It’s not about the payment itself; it’s about all the other features and benefits they get in terms of recognizing loyal customers [and] being able to see their shopping history.”

Square’s loyalty features enable merchants to offer rewards based on spending. Merchants can provide different incentives to new customers and repeat customers. Square enables merchants to offer discounts as percentages and dollar amounts. The app provides reporting on sales trends in real time.

The reporting feature helps close the gap with more complex products, such as Intuit’s QuickBooks Point of Sale, which is integrated with Intuit’s GoPayment reader. Merchants pay for the difference — the cheapest version of QuickBooks Point of Sale costs about $1,100, whereas Square’s Register app is free to download.

“Tracking sales history is extremely important to understanding the health of my business,” Jordan Ceresnie, a small-business owner and Square customer, said in a press release. Square did not respond to an interview request by deadline.

“Built-in analytics allow me to look at the day’s total transactions and most popular item at any point throughout the day,” said Ceresnie, who owns Cheese Dream in Ann Arbor, Mich.

More than 2 million consumers and small merchants use its technology to accept payments, Square said this month.

Square is “probably getting a little more exposure to the micro-business market than maybe Intuit or VeriFone would have,” says Beth Robertson, director of payments research at Javelin Strategy and Research. But “I don’t think they’re so dominant,” she says.

Both Intuit and VeriFone, a point-of-sale terminal maker that has two products that compete with Square’s, “had stronger recognition in the small-business market,” Robertson says.

Square’s strength is in serving micromerchants, who typically behave like consumers, Robertson says. Improving its offerings helps Square maintain its appeal to those customers while “trying to build recognition with the small-business sector as well,” she says.


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