Transaction costs are always a constant problem in today’s society but entrepreneurs everywhere consistently find new ways to create efficiency. The most recent example can be found in a company called simply Square.
Square is a privately owned company whose namesake comes from a small square add-on that plugs into the headphone jack on your Smartphone or Tablet PC.
This little device has the potential to revolutionize the way businesses and customers interact. According to their website, “Square is the simplest way to accept credit cards. It’s easy to use and comes with a free credit card reader for your phone or iPad. Sign-up is quick. No complicated contracts, monthly fees, or merchant account. When you swipe cards with Square there is just one fee: 2.75%. Download the free app from the Android Market or iTunes App Store.” The company provides free apps, free hardware, and universal credit card acceptance all for a small fee of 2.75% of each transaction.
They have abolished the cash register. Stores can accept cash and credit payments straight from a smart device and they get the money in their account the next day. In so doing the company has eliminated the transaction costs that result from building and maintaining a standard point of sale station, printing receipts, and from having to wait for the proceeds from sales. The software also records transaction history so business owners can even get live sales data throughout the day.
And Square simplifies the shopping experience for customers. Businesses can create virtual shops that allow the customer to instantly peruse relevant product information and prices. It also eliminates the need to carry cash; you can pay with your card or simply start a tab and pay online from the comfort of your own home. Plus, you no longer have to deal with paper receipts. You conveniently receive them either in an e-mail or via a text message.
Transaction costs prevent trade benefits from being realized. But in a free market society individuals are free to find solutions that allow those benefits to be better realized by both parties. Square is just one example of the continuous innovation process.