Apple today announced a new partnership for Apple Pay with Square, which will release a new card reader designed to allow small businesses to take Apple Pay payments as well as credit card chip payments, but not card swipes.
However, Square says it will ship its standard magnetic card stripe reader with the new NFC/EMV card chip reader so merchants can accept all forms of payment. Square will earn its standard 2.75 percent fee on all of these transactions, allowing it to earn money by pushing the adoption of Apple Pay.
Merchants can now register to receive the new Square “Contactless + Chip Reader,” which will ship in the fall. Square will be sending out 250,000 of the readers for free. They’ll cost $49 after that, but in some cases merchants can get a refund for the first $49 in fees they trigger with the the reader. It can either be plugged into the Square Stand USB hub, or merchants can charge the reader’s battery and then connect wirelessly.
The partnership announcement came during Apple’s WWDC conference keynote. Apple also announced new retail partners, support for loyalty cards with its new Wallet app (formerly Passbook), and an expansion to the UK for Apple Pay.
To pay, customers will either tap their phone to the new Square reader, dip the chip on their credit card, or ask to swipe with the old Magstripe Reader dongle. All of these payment types trigger Square’s standard 2.75 percent fee to merchants.
The partnership comes after many thought Apple Pay and Square would become bitter competitors. Late last year, though, Square co-founder Jack Dorsey said he wanted his system to facilitate Apple Pay payments, and the company was rumored to be building a device to do so.
Now the companies will be working together, with Square earning transaction fees for Apple Pay payments made with the reader. A lack of NFC readers is a huge barrier to usage for Apple Pay, yet Apple doesn’t make its own terminal. With its focus on clean industrial design, it makes sense that Apple would award the deal to effectively outsource NFC reader production to Square. And since Square racks up revenue from Apple Pay, the two could form a powerful alliance to promote adoption.