Does Square's Card Case spell doom for traditional plastic?

By Justin Boyle

What's with this war on traditional credit cards? Mobile payment apps are popping up left and right, and U.S. market leader Google Wallet seems to be leading an aggressive charge against all spending instruments marked with embossed digits and shiny magnetic strips.

The attempted rampage is making slow progress, however, and the possible reasons for this are numerous:

• Apps may have been slow to raise awareness about themselves as an alternative to traditional credit methods.
• Credit customers may not trust software companies enough to embed all of their financial information in a single electronic device.
• People may just be more comfortable with their old familiar deck of plastic credit cards and hesitate to make the switch.

Whatever the reason, traditional credit cards haven't seemed to meet their match yet. That is, they haven't until Square came along with Card Case.

Why Card Case is different

Square, the mobile payments company started by Twitter founder Jack Dorsey, has already changed the world of credit card payments once. The tiny device that accompanies the original Square app allowed entrepreneurs and small businesses to accept credit card payments with low labor overhead and minimal hassle.

Now, Square is doing for the customer what it did for the cashier. Card Case eliminates the labor overhead associated with payment by traditional credit card: namely, pulling it out, swiping it and putting it away.

Card Case allows you to do something that establishment regulars, bigwigs and certain other privileged people have been able to do for years: Walk up to the counter, tell the cashier your name, then walk out with your purchases in hand.

People who have used it say it feels magical. Of course, any sufficiently advanced technology, to quote British author Arthur C. Clarke, is indistinguishable from magic.

How Card Case works

The pay-by-name experience that Card Case gives its users is accomplished through a relatively new technology developed by Apple (which is why, for the time being, Android users will still have to take out their phones). The new bit of tech allows "geofencing," which communicates to an app when a phone has entered the perimeter of a certain area.

If auto-payment is authorized for a particular location, Card Case doesn't even have to be running for the cashier's component of the program to recognize you. A photo of you shows up on the cashier's screen -- a simple but effective form of identity theft protection -- and a receipt of your transaction is sent to your phone immediately after payment is completed.

The photo-transmission feature, along with a few other rather elegant measures against fraud, could make paying with your name roughly as safe as paying with your credit card. Add that to the feelings of magic and prestige that come with using the system and you've got the recipe for an app that stands to truly threaten plastic's superiority as the weapon of choice at retailers everywhere.

Drawbacks and limitations

Of course, there are a few pieces of the puzzle that Square still has to put together if Card Case is going to be the final nail in the coffin of plastic. For one thing, exponentially more businesses accept credit cards than accept Card Case autopayments, since the technology is so new.

What's more, Card Case is unlikely to gain a foothold in the world of online credit payments. Credit card use is also declining in that sector, though, thanks to services such as PayPal that have been providing the same sort of name-recognition service to online customers for years.

One more thing, and perhaps a significant thing, is that Card Case presently can only draw money from your bank account, meaning it functions more like a debit card than a credit card. That means that customers who use it can't opt to pay with their rewards credit cards and thereby rake in the perks that come with them -- at least not yet.

Only time will tell how many businesses and consumers will embrace Card Case. But if prestige and magic have anything to say about it, this new technology may spell trouble for traditional plastic.