The app, which works with Android and iPhone, lets customers pay via credit card without producing their card by setting up a tab with merchants who use Square. In the just-launched update, users will also get loyalty cards, the digital version of punch cards that offer deals like buy 10 and get one free. The app also includes management tools that help users organize multiple cards.

Merchants who use the Square app, which turns an iPad into a sleek point-of-sale register and provides inventory management support, will get tools to create and manage loyalty rewards programs. Because the digital program includes sales reporting, Square touts the feature as a way for businesses to attract new customers and strengthen customer loyalty.

"These features are what our merchants have been asking for and are what are needed to run a business, so I think we will see more Register adoption," spokesman Khobi Brooklyn said in an email.

Square, founded by Twitter co-founder and Executive Chairman Jack Dorsey, launched its first product in early 2010: the dongle that turns an iPhone or iPad into a credit card reader, which has become ubiquitous in San Francisco, where the company is based.

The number of Square users has doubled to 2 million in 2012, . The dollar amount of the transactions it processes comes to US$6 billion a year on an annualized basis, according to Square. The company takes a 2.75 percent fee per swipe from merchants.