The realm of "mobile payments" is somewhat elastic and elusive. However Square fits, pardon the pun, squarely within the category. We wrote about the company in December in conjunction with the official launch:

There are a range of companies working on what might be loosely called "mobile payments." But what's most interesting to me is the way in which Square enables people to accept credit card payments without a merchant account and related fees. Zong Plus and Bling Nation do this too but Zong for example takes a pretty big slice of the value of the transaction.

It's not clear what the Square-fee would be. However I would imagine that the company is banking on subscription revenues or a much smaller per transaction fee than current vendors and card companies. 

Those fees are revealed in the iPhone app:

• 2.75% for credit card swipes (made possible by the free hardware attachment)
• 3.5% for keyed in credit card numbers 

These rates are not much better than more conventional credit card processing fees from banks and card issuers. However Square is simple and avoids the infrastructure requirements (terminal) and merchant account. There's also no bureaucracy to deal with.

It allows any small service business with an iPhone or Android device to accept credit cards in minutes. (I realize this sounds like sales collateral but it's actually the truth.) It also facilitates private transactions between individuals that otherwise would only have been possible by cash or check.

There's enormous "heat" and activity in the mobile payments segment and many of the startups now operating (Zong, Boku, Square) and several other will likely be acquired, as they gain adoption, by larger players for defensive reasons. 

Here's the customary explanatory video:

Related: Square Brings Credit Card Swiping to the Mobile Masses, Starting Today