Square gets into gift cards with digital version

• Square's digital gift cards could be boon for small merchants

SAN MATEO, Calif. — Square just got thousands of small merchants into the holiday spirit.

The mobile-payments company said it is now offering digital gift cards, so anyone can purchase a card from the 250,000 merchants that accept Square Wallet, an iOS and Android app that lets consumers pay automatically with their smartphones. The gift card recipient only requires an e-mail address.

The service could be a boon to small merchants, many of whom shied away from offering gift cards because creating plastic cards is costly and cumbersome.

"Small businesses have never been able to offer gift cards before," Square CEO Jack Dorsey told USA TODAY. "You can send a Square gift card to anyone with an e-mail address. If they don't have a smartphone, they can print out a QR code."

Dorsey, who created Twitter, made the announcement on Fox News' Fox & Friends.

Square's approach could upturn the estimated $100 billion gift-card market, says David Wolman, author of The End of Money, which chronicles the de-emphasis of cash amid an emergence of mobile-payment services.

"The gift card landscape was so dizzyingly crowded that I basically ignored it," Wolman says. "Not anymore. My first impression is that this fills a real need."

Doug Dalton, owner of Cask, a beverage vendor in San Francisco, says digital gift cards should spur sales for merchants and make it easier for consumers to buy holiday gifts for hard-to-please friends.

Square's gift-card gambit is its latest stab at separating itself from a crowded field of competitors, including PayPal, Google, Intuit and Groupon.

Handicapping the mobile-payments race, each major player has carved out a niche, according to analysts. Square is ideal for small merchants such as coffee shops and food trucks. PayPal Here is positioned for businesses that have an online and offline presence. Groupon's new service will appeal to businesses such as restaurants and spas with which it already works. Intuit's GoPayment is designed for small and midsize businesses.

In October, Square got a major jolt from a partnership with Starbucks. That deal is likely to parlay into more deals with major retailers -- many of whom follow the lead of Starbucks, an early adopter of technology.