So I have built something that already exists...now what?

Yeah it's always a little depressing to discover someone else has had the same idea as you - and executed on it. Although it is a little surprising you haven't heard of these guys - or at least the product - it's been in the press a fair bit. Hopefully the lack of marker research / market awareness is not indicative of any other issues :)

Generally speaking, there's always room for more than one vendor, for any product or service. Even in the giant-dominated worlds of search and social networking there are plenty of smaller players who do well. If there is a market for something, there'll be room for several suppliers - perhaps many.

So, I wouldn't get disheartened. As others have said it's free market validation for you (assuming they have customers). So look at their customers - who they are, what's the use case for them, what value do they derive from it? How much do they pay? Answers to these and other questions will help you market your version more effectively.

The only issue is: can you deliver? Do you have the technical know-now to build this product (e.g what about the card-reader? security, customer data protection etc etc?). And do you have the resources / sales route to take it to market and get customers?

If you think you can build this and get it market, then great. Go for it. The competition will only force you to better your product, give you ideas and show you where the money is.

I think that's a problem for the cardholder, the card company, and most of all for the merchant who later takes a payment using the stolen card (and usually gets stuck with bill). Square doesn't bear the cost, and after all, what can any payment processor do to prevent scammers from mimicking their hardware and software?

Shop this around with VCs as a "square competitor". If the market is great, then there's room for more than 1 startup.

Hey, I work at Square and I'd say if you're passionate about it you should go for it. Startup life is a whole lot more fun than corporate life. If you've found something you're so excited about that you want to spend your free time building it that's totally awesome.

The one piece of advice I've got is to watch out for the business/regulation side. Dealing with the payment card networks is a seriously non-trivial problem.

Do you have a demo? Contact me at mirko at buholzer cm