Twitter creator Jack Dorsey shows off his new mobile payments startup

Twitter creator Jack Dorsey just launched the site for his up-and-coming mobile payments startup, Square.

Square’s product lets people process credit card payments through their mobile phone. It’s a small device that attaches to the audio input jack of a phone. You can swipe your card through a slot on the device and the store can send the receipt to either your e-mail or mobile phone. You can also use text messages to authorize payments in real-time.

So what’s revolutionary about this product? It enables anyone to accept credit card payments with their phone, so that means anyone from your local hot dog vendor to an artist at a city market can take Visa or MasterCard.

But let’s be clear, this isn’t disruptive to credit card companies — in fact it potentially brings them thousands, or millions of new customers because it reduces the need to carry cash. The more you use your card, the more opportunities they have to charge you interest. And you still need a credit card to use it. Square faces a number of potential competitors. PayPal recently opened an application programming interface and is becoming a platform for outside developers to create innovative payment methods. Another company, Wireless Dynamics, launched an iPhone add-on device last month using RFID capabilities to process payments. There’s also a risk that Apple itself decides to add RFID functionality to its phone.

Dorsey recently found new space for the company in The San Francisco Chronicle’s building and the startup has been testing its technology in local coffee shops like Sightglass. Square is backed by Khosla Ventures and other angels at a reported valuation of $40 million.

Receipts look like this: