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Square’s new contactless and chip card reader, which sells for $49, is gaining traction after shipments began in Q1, according to Square CEO Jack Dorsey.

To date, the firm has 500,000 cumulative orders for the reader. These sales helped bolster Square’s hardware revenue, which increased over sixfold YoY to $16 million in Q1 2016. When a merchant orders the new reader, they receive two mobile point-of-sale (mPOS) devices — one that accepts magnetic stripe payments, and one that processes both chip cards and contactless transactions.

The firm also provided some information about chip card transactions.

EMV transactions are becoming more commonplace among consumers. According to Square, 61% of processed transactions in March 2016 came from chip cards.

But consumer adoption is outpacing merchant adoption. Roughly 25% of Square merchants have ordered or received EMV-enabled terminals. Among Square merchants, new distribution channels — like a partnership with Discover that provides certain sellers with free readers — could lift EMV terminal penetration among Square's clients.

However, Square’s strong EMV and NFC reader sales could signal changing tides among smaller merchants. Small businesses have been hesitant to adopt EMV, because many small business owners believe the costs associated with terminal upgrades outweigh the benefits.

But the vast majority of Square merchants are small or microbusinesses, so strong reader sales imply that these clients are starting to see and act on the value that EMV and contactless readers provide.

That’s a pattern that may extend through other small businesses moving forward. And small businesses' newfound willingness to begin upgrading to new terminals indicates a huge growth opportunity for small businesses.

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