Square payment solution hopes to give NFC a run for its money

Mobile payment users, like the Sprint Nexus S 4G owners who recently began tapping into Google Wallet (Unfiltered: Google Wallet launches with Visa, sort of), are expected to exceed 375 million by 2015, according to a new report from research firm In-Stat.

As their numbers grow, said the firm, so too will the demand for NFC-enabled handsets, pushing annual NFC chip shipments to 1.2 billion plus, again by 2015.

“As the costs of NFC chips decline, and NFC radios are combined with other chip functions, the cost to integrate NFC into handsets will be outweighed by the benefits,” In-Stat Research Director Allen Nogee said in a statement.

Samsung, for example, has included an NFC chip in its new Google-branded Nexus Galaxy smartphone, which the Android Beam feature in the Ice Cream Sandwich iteration of the OS depends on (CP: Google's 'Ice-Cream Sandwich' finally arrives).

Hoping to slow the trend, or at least slip in ahead of its widespread consumer adoption, is Square. Created by Twitter co-founder Jack Dorsey, the company offers free (square-shaped) credit-card readers, a fraction of the size of a credit card, that plug into the headphone jack of an iPad, iPhone or Android-running smartphone, enabling small businesses to accept credit card payments.

The company announced a partnership with Walmart this morning that will increase its brick-and-mortar availability by more than 9,000 locations. The reader is free to merchants — it sells for $10 in stores, but buyers can be refunded online — who pay 2.75% of each purchase, which is where Square makes it cash. (Investors seem to find it a good strategy; in June, the company raised $100 million in Series C financing).

Square supports Visa, MasterCard, American Express and Discover, works with a free app and can reportedly be set up in a matter of minutes.

"We don’t currently believe that NFC as a payment technology is likely to improve either the merchant’s experience or the buyer’s experience,” Square COO Keith Rabois told Business Week.

NFC technology is also being used for key-less entry solutions. Yale, the biggest name in the lock game, announced in September that digital versions of a door or car key can be sent over-the-air to a phone, which can then be used to open an NFC-enabled lock. Last year, the company ran a successful trial at a Clarion Hotel in Stockholm.

Whatever their use, NFC chip shipments are headed upward, confirms In-Stat.

“The growth of combo chips will also allow NFC radios to piggyback on technology that already has significant penetration in the market. For example, Bluetooth radios, which currently have 100% market penetration, can be integrated with NFC radios, making the choice to include NFC easy for OEMs.”