VeriFone, a competitor in the mobile payment space, in an extremely bizarre fashion accused Square of having a “gaping” security hole in its technology. Naturally, the biggest fear in the payment industry is that hackers can commit fraud by downloading mobile payment apps which contain pertinent credit card info. It seems that VeriFone not only exacerbated the situation, but took a very unusual approach.
VeriFone publicly announced Square’s vulnerability before the mobile payment start-up had a chance to defend itself. Square felt as though VeriFone was deliberately going out of its way to knock its technology. And then VeriFone had the audacity to personally call each major credit card Company – Visa, Mastercard, American Express, Discover and JPMorgan Chase – to forewarn them about this alleged problem. Lucky for Square, JPMorgan Chase is a loyal partner and defended the new technology.
To seal its case against Square, Verifone even spent the time to write a test app that demonstrated how easy it would be for a criminal to steal financial or personal information from a credit card as it is swiped though the phone. It used really harsh statements such as, “If the industry allows Square and others to short-circuit security best practices, it will seriously jeopardize the integrity and security of the payment infrastructure.”
Why did VeriFone take these actions? Twitter followers and many others can conclude that VeriFone might just be feeling threatened by this new competitor. After all, Square has a dynamic product. It is receiving $27.5 million in funding at an enviable valuation of $240 million. Since its commercial rollout in early 2010, hundreds of thousands of small businesses have signed up.
Square’s CEO Jack Dorsey, one of the founders of Twitter, wrote an open letter to address VeriFone’s allegations. He eased his customers concerns by reminding them about the extensive security features Square has in its hardware. He basically said that identity theft is not a new issue and can happen to anyone with a credit card. He added, “any technology – an encrypted card reader, phone camera, or plain old pen and paper – can be used to “skim” or copy numbers from a credit card.”