As Square looks to differentiate itself in an increasingly competitive mobile payment industry, the company’s launch of several new tools suggests that downplaying basic credit card swiping features will be key in winning over merchants.

Square has launched three new products that are geared towards helping merchants better manage their digital payment initiatives. As the mobile payment space has become significantly more competitive in the past year, the features hope to address the importance for merchants in integrating loyalty programs and rewards into mobile payments.

“With order-ahead, offline mode and inventory tracking, Square is finally starting to look like a real point-of-sale system,” said Jordan McKee, analyst at Yankee Group, Boston.

“These features are intended to help Square move past micro-merchants and tap into the more lucrative SMB market,” he said. “This moves it closer into the category of software as a service, cloud-based point-of-sale providers like ShopKeep and Leaf who focus exclusively on small and midsize business. While Square lacks some of the more robust features offered by other cloud-based providers, the fact that it does not charge a monthly fee positions it as an attractive alternative.”

Mobile-first ordering
Square’s first new feature is called Square Pickup. This lets merchants turn on online ordering through their Web sites so that a consumer can pick up an order in a store.

Square Pickup lets merchants set up pick-up times and send SMS alerts to a consumer when their order is ready.

Consumers simply walk into a store and identify themselves when they want to pick up their order.

Food ordering continues to be one of the bigger opportunities for mobile commerce as more consumers turn to smartphones and tablets to place quick and repeat orders.

The order-ahead features will go head-to-head with other services including GrubHub Seamless and Eat24, where both companies have already established roots.

In fact, GrubHub Seamless claims that more than 40 percent of its orders are placed through mobile (see story).

At the same time, a number of restaurants are piloting and launching their own standalone apps that integrate pick up and delivery services.

Square notes several different businesses that have already tested order-ahead features.

For example, New York coffee shop Café Integral has tested in-store pick up to cut down on long lines.

A Greek restaurant in San Francisco called Souvla is using the tool to bolster initial orders since opening three weeks ago.

Square also inked a big deal with Whole Foods in February. Locations in the Bay Area in California can pre-order sandwiches with the feature (see story).

Merchants who choose to enable pick-up orders are charged an eight percent processing fee. This fee will be reduced to 2.75 percent through July 1.

“Adding offline payment increases the value of Square to all of its merchants and could reduce barriers to entry for merchants who are mobile or are often in different locations where connectivity can be unpredictable,” said Thad Peterson, senior analyst at Aite Group, Boston.

“Order ahead and pick up could help with their restaurant and QSR clients as well as specialty retail stores with a heavy millennial demographic,” he said.

At the same time, customer acquisition is a selling point for merchants with the high processing fee, per Yankee Group’s Mr. McKee.

However, ordering alone will likely have little impact on acquiring new customers if merchants are not able to integrate a loyalty or some other kind of rewards program into their initiatives, too.

Another screenshot of the new Square features

Tacking on added value
Another feature being rolled is called offline mode, which lets merchants accept payments without being connected to the Internet.

The third feature is called offline inventory, which pulls in alerts directly to Square Register when a company is running low on a certain product.

For example, a coffee shop will be able to see when they are low on cups, which are set up by the merchant.

“Deployment of these capabilities requires merchants to manage the fulfillment of advance orders and pickup,” said Brian Stein, managing director at Pervasive Path, Cleveland, OH.

“Organizations which already have distinct ordering and fulfilling processes will be able to more seamlessly take advantage of this technology,” he said.

“Additionally, customer adoption is also likely to vary based on a number of factors, including product type, order complexity, order repeatability, integration with other mobile apps and loyalty programs and in-store experience.”

Square’s move towards more complex features underscores the growth of the mobile payment space.

At the same time, a number of competitors including PayPal, MasterCard, Intuit and Verifone are all rolling out product innovations that build on traditional point-of-sale systems to give marketers additional features.

“Today what we’re really excited to offer are a couple of features that help businesses streamline their operations,” said Semonti Stephens, spokeswoman at Square, San Francisco.

“We’re thinking about things like these — what are things that are going to make it easier for businesses to do what they love?” she said.

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York