Square's Jack Dorsey calling VeriFone's vulnerability claims 'not fair or accurate'

We had a feeling that Square wouldn't let VeriFone call it out without issuing some sort of statement, and CEO Jack Dorsey has responded to the claims of a gaping security hole in the form of an open letter on the company's website. Dorsey calls its competitor's accusations "not fair or accurate" and says that many of the necessary security measures are already built-in to your credit card itself. He also points out that this sort of credit card number thievery is possible every time you hand your plastic over to a waiter or salesperson, and that its partner bank, JPMorgan Chase, stands behinds all aspects of the service. To us, it seems like Verifone is more than a little scared at the prospect of Square undercutting its fees and potentially upending the POS business -- but we're just theorizing. One thing is for sure though, we'll be hearing a lot more about this as the mobile payment war heats up in the future.

The Mobile Lowdown: Nokia, Apple iPad Pricing, Square, Disney

Our rundown of mobile news to start your day. Nokia’s MeeGo payoff; what the ASP of today’s iPad tells us about what’s next; Square hits $1 million, and Disney (NYSE: DIS) hedges its bets between apps and HTML5 with a new acquisition. Read on for the details.

—Disney: Here’s one win for the open mobile web, or at least an example of how one big media company is clearly hedging its bets. Disney has bought Rocketpack, a Helsinki, Finland-based company that runs a platform to develop HTML5 games. Terms of the deal were not disclosed but Techcrunch estimates the value to be between $10 million and $20 million. The company will become a subsidiary of Disney Interactive Media Group. What’s interesting is that while Rocketpack does develop its own games (such as Warimals, pictured), its main business is in offering its platform to other developers. Owning an asset like this puts Disney in the position of producer and aggregator rather than straight mobile content owner.

—Nokia: Nokia (NYSE: NOK) is putting the bulk of its effort now into making Windows Phone-based smartphones, but it is also trying to forge ahead with MeeGo…That is, if it can keep its developers on-side and away from the clutches of Intel (NSDQ: INTC) and Google (NSDQ: GOOG). A report from the Finnish newspaper Taloussanomat (via YLE) says that apparently Nokia is now offering bonuses of 50 percent of a MeeGo programmer’s salary if that employee stays on until the launch of the first MeeGo smartphone. The programmers have to hit three deadlines to get the payoff: end of July, end of September and end of December. Nokia has yet to give an official launch date for the device, which some are speculating will be called the N950, and it is unclear really what it plans to do with the OS in the longer term.

—iPad: Lots of numbers coming out of yesterday’s unveiling of the iPad from Apple (NSDQ: AAPL), including some on pricing. Up to now, Apple has sold 15 million units and generated $9.5 billion in revenue. That works out to an average selling price of $633. 3G devices have proven especially popular. The iPad 2 will cost the same as the first model, but it may not be unrealistic for Apple to see more people buying the iPad 2 at higher price points: the next-closest competitor on the market, the Xoom, is priced nearly at the same level as Apple’s most expensive device ($799 for the Xoom vs $829 for the 64GB/3G iPad), and there is growing consumer interest in the device. More importantly, prices for older iPads are now dropping fast. And all this is setting the stage for an iPad 3 that will most likely be somewhat more expensive.

—Square: The retail mobile payments company is now processing $1 million in transactions per day. The news came via a tweet from Jack Dorsey, the company’s CEO who is also the co-founder of Twitter. That’s just a small dent in the billions of dollars per day done in retail transactions worldwide, but it is a huge leap for a service that only went live last year and originally projected to process $40 million in 2011. Square is not breaking out yet how many transactions are done via its dongle versus manual entry. The company takes a 2.75 percent cut for dongle-based transaction; but if users enter a card number manually (that is, not using Square’s own scanning dongle) then the commission is up to 3.5 percent, plus 15 cents per transaction.

Mobile Payments: Paydiant Gets $7.6 Million; Square Dropping Its Fees

It’s still very early days for mobile payments, but with operators, handset makers and Google (NSDQ: GOOG) jumping on the NFC bandwagon, the larger field is getting crowded with speculators looking to strike gold, in particular by pinning hopes (and investment) on to entrepreneurs with strong track records. Yesterday, Paydiant, a mobile payments company still in stealth mode, picked up $7.6 million in funding; and Square, Jack Dorsey’s payment venture, dropped its transaction fees in a bid to ramp up user numbers.

Just one small question first: Given that Apple (NSDQ: AAPL) has now imposed a new set of rules for in-app payments, it is still unclear how this will affect the roadmap for products like Paydiant and Square. Like so many other startups in this space, these companies are all about the iPhone for their earliest iterations.

Paydiant is picking up its a Series A round led by North Bridge Venture Partners and General Catalyst Partners. The company says that the investment will be used towards product development, sales and marketing.

And what is that product? Not entirely clear yet, except for a few clues you get from the company’s homepage. It looks like it will involve the ability to make payments for services via a Paydiant app with the touch of a button. It looks like it will integrate with a user’s bank account (with a screen on the homepage showing ATM machines—money transfers and bill payments, perhaps?).

Paydiant will push selected offers to users as well (hinting that it might use APIs from companies like Groupon, or develop another offer competitor itself). Paydiant says it will launch later this year.

The company has been started by Chris Gardner, Kevin Laracey and Joe Paratore, who are described in the release” title=“release”>release as “three proven entrepreneurs in the e-billing, payments and mobile space.”

They have also all worked together before online billing and payments company edocs, which was acquired by Siebel Systems (now part of Oracle); and Gardner and Paratore went on to work together at SMS mobile payments provider m-Qube (which then got acquired by Verisign).

Jim Moran, General Partner at North Bridge and John Simon, Managing Director at General Catalyst have also now joined Paydiant’s Board of Directors.

Square, meanwhile, is also looking to grow the number of people using its phone-based credit card transaction system by getting more competitive on its charges.

The startup, founded by Twitter co-founder Jack Dorsey, has now dropped its transaction fees so that merchants or anyone else taking card payments for services has to only pay a 2.75 percent fee for the transaction; previously those users would have had to pay a 15-cent fee on top of that. If users enter a card number manually (that is, not using Square’s own scanning dongle) then the commission is up to 3.5 percent, and they will still need to pay the additional 15 cents per transaction. 

The move is designed to compete directly with other payments providers like Verifone and Intuit, which still charge per-transaction fees for similar services.

Square is significantly further along in its business than Paydiant. The company, which raised a $27.5 million round just in January (funny: the funding has the same numbers as Square’s commission) is expected to process $40 million of transactions in 2011, according to TechCrunch.

And in the landgrab for smaller merchants, it’s currently signing up 100,000 of them per month, compared to 30,000-50,000 last autumn.

Square mobile payment system getting simpler pricing, keeps angular shape

If you hate doing math and you run a small business then surely you've looked longingly at mobile credit card systems like Square's longingly. No handling of cash certainly would make life easier, but Square's system of fees and surcharges weren't exactly easy to figure out themselves. Now the company has simplified things, dropping the $.15 per-transaction fee for swiped purchases, charging a simple 2.75 percent on each transaction. If, however, that transaction is being made without swiping the actual card the $.15 transaction fee sadly comes back, but the percentage fee has gone down from 4.0 percent to 3.5. So, a little less of your handiwork will be absorbed by the man.

Square has billboard in Times Square, still slowly delivering card reader

If you've been reading TUAW for any length of time, you've probably seen our posts aboutSquare. This startup had the idea to develop a free credit card reader that could be used with an iPhone (later expanded to many phone models) or iPad, and provide a card authorization service with low enough rates that basically anyone in the U.S. could accept credit cards.

The service works very well; I've moved from a traditional credit card authorization service to Square, and I'm saving money in the process. However, an informal Twitter poll showed that there are still a number of people (including our very own Dave Caolo) who are still patiently waiting for their readers over a year after signing up. Not good.

That's apparently not keeping the company from shouting from the rooftops about how great their product is. The company received funding from a supporter to install a huge multi-panel billboard in New York's Times Square showing how anyone can accept credit cards with the Square reader and iPhone app. They've also teamed up with fashion designer Vivienne Tam to come out with a limited-edition high fashion card reader.

We're happy to see that you're going places, Square -- just be sure to keep sending out those card readers to all those people who are still waiting.