OAKLAND, CA (RNN) - It's been said necessity is the mother of invention.
When artist and glass-blower James McKelvey lost a sale from a customer with no cash, necessity became the driving force behind an app called Square that puts the power of small business into the hands of everyday people.
"He had a woman who wanted to buy one of his pieces. She tried to pay with an American Express card, but he couldn't take it," said Kay Luo, a spokesperson for Square. "She kept saying she'd come back later, but he knew he'd never see her again."
He called his friend Jack Dorsey, who not coincidentally had already revolutionized personal communication by creating a little app called Twitter.
"They were talking on their iPhones and thought 'Why shouldn't anyone be able to accept a credit card,'" Luo said.
The two put their collective genius together and Square was born, giving everyday people, from established businesses to babysitters and people selling stuff at garage sales, the ability to swipe credit cards on their smartphones.
After users download the free app and sign up for a Square account, the company mails out a small card reader that plugs into the output jack of an iPhone, iPad or Android.
Customers can swipe their cards, sign their name on the touchscreen and even receive e-mail receipts. The company pays the credit card fees but charges a 2.75 percent fee plus 15 cents per transaction for a card that is swiped and 3.5 percent plus 15 cents for a card entered manually.
Andy Radlow and his wife Nichole test drove the app at a PTA event at the school their two sons attend.
"[The PTA] brought in $3,200 the first night simply because people had a better way to collect payments," Andy Radlow said.
The app has since become a staple of fundraising at the Oakland, CA, elementary school where Nichole serves as PTA co-president.
"We do everything from baked goods, T-shirts and sweatshirts, and then we do auctions. Literally we use it for everything," Andy said. "Lots of people don't carry cash, lots of people don't carry checks, but everybody carries plastic."
The simplicity of Square has made starting a business a reality for people struggling to make ends meet in a down economy.
"Increasingly, we're seeing people who are maybe out of work and they decide to be self-employed. You see a lot of people becoming handymen, dog walkers, and they think, 'I'll just start my own business,'" Luo said.
For Steve Rossen and Jana Fain, co-owners of Mardy's Munchies Bakery in Los Angeles, the app helped them serve up more sweet treats to customers who don't always carry cash without taking a bite out of their bottom line.
"We do a lot of farmer's markets, and we had no way to accept credit cards," Fain said. "I had been researching different devices to take credit cards and they were so expensive. When Square came out, it felt like 'We can't lose.'"
Eradicating the need for electricity at outdoor markets and the bulk and cost of an expensive card reader has proven to be a convenient and profitable choice for the bakery.
"I'd definitely say our sales have increased 25 percent at the farmer's market. We're hoping to double them at the food festivals this summer," Fain said. "We've told other vendors, this is hands down the best thing to use for food trucks."
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