Twitter founder Jack Dorsey unveils mobile payment system gadget

Twitter co-founder Jack Dorsey has created a new type of mobile device that will allow people to charge credit card payments through handsets including the iPhone and iPod Touch.

The device, known as the “Square”, was revealed at the European Internet Fair this week to massive interest from investors, merchants and the technology industry.

Dorsey said the Square, which works in a similar way to the credit card readers used in retail shops, is designed for use with small transactions charged by “”people like babysitters, dog walkers, golf instructors, flight instructors” to collect payments.

“A lot of people in the world today are using plastic cards to pay people. But receiving payments from them is very hard,” Dorsey said while demonstrating the device. “There’s a number of people who are providing services, or selling something, that can’t transact with credit cards today because of the complexity.”

The gadget clips into a handset’s audio input, and transfers information gained from a credit card’s magnetic strip into an audio file which is then decoded by an accompanying application. A payer verification feature then appears, with a signature required on a device’s touchscreen.

Dorsey said the device had been invented during the downturn, as online companies looked for better, and cheaper, ways to sell things online. He was also inspired by the “immediacy, approachability and transparency” of Twitter.

“The crisis has actually been helpful in terms of innovation for the payments industry,” Dorsey said. “There’s been a clearing of the slate and people are really going down to the bare minimum and figuring out how we can actually innovate and build new things.”

“The financial world is amazing right now because there’s a clean slate. A lot of these industries are looking for something very small and innovative.”

Dorsey also said due to the device’s reliance on an audio jack, it could be used with laptops, desktop PCs, BlackBerry and Android-powered handsets.

Industry buzz suggests the one-inch long gadget isn’t just a gimmick, with TechCrunch founder Michael Arrington saying there is a “feeding frenzy” of investor interest around the device.

Dorsey himself said he had earned $US650 simply be allowing interested business partners to test the device, while saying a “beta” version is currently being trialled by some businesses across the US.

“We’re trying with a bunch of different profiles of folks in New York, San Francisco, LA and St. Louis, Missouri. There are piano teachers, flight instructors and coffee shops. It can be used in a retail store like Apple, all the way down to Craigslist or paying me back for that dinner you owe me.”

Dorsey said his developers were still working to ensure the device was fraud proof, but if all goes well the Square could be commercially available during the first quarter of 2010.