With its Apple Pay contactless payment terminal on the way, mobile payments challenger Square is giving away point-of-sale software and analytics tools to win over small business owners in Australia.

Launched by Twitter co-founder Jack Dorsey in 2009, Square found success in the US with its free smartphone-based magnetic stripe credit card reader. The company mostly makes money from transaction fees, offering small businesses an alternative to bank-issued merchant facilities and eftpos terminals.

For what bankers call card present transactions, the heart of Square is a neat credit card reader that connects to a smartphone or tablet via its earphone jack.

Square opened an Australian office in May.

However, it is hampered by the fact Australia has abandoned mag-stripe credit card transactions in favour of "chip-and-PIN" cards – using the EMV standard (Europay, MasterCard and Visa) – along with "tap-and-go" contactless payments such as Visa's payWave and Mastercard's PayPass.