You can use Apple Pay at more than 700,000 retail locations across the U.S., but good luck trying to pay with your phone at your neighborhood coffee shop or favorite food truck. While national chains and big-box stores are working to upgrade their systems to accept contactless payments and chip-and-pin cards, small businesses have been much slower to join the mobile payment party.

When Cupertino took the wraps off Apple Pay last fall, some predicted that Apple would crush smaller mobile payment companies like Square. Now it's clear that Apple needs Square to reach the millions of independent shops that otherwise would sit out the switch to mobile payments. Square's new Apple Pay reader will do with contactless payments what its original reader did with traditional credit and debit cards: make it easy and cheap for small businesses to accept any way you want to pay and kill the phrase "cash only."

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How it works

Square partnered with popular San Francisco-based coffee chain Blue Bottle to test out the new reader in the days following its unveiling at Apple's Worldwide Developers Conference, so we ventured down to the coffee shop's Market Square location to see if it's as easy to use Apple Pay with Square as it is in other settings.

The verdict: It's a cinch to use, because the new reader works just as seamlessly as standard NFC terminals. When the sales associate is finished ringing you up, a green light will flash on the reader, which indicates that it's ready to accept your payment. You'll then just tap your Apple Watch or iPhone on the coaster-shaped reader, and you're all set.

The one caveat with this reader is its nondescript look: It's a small, flat, white box that isn't actually attached to the iPad-based Square register system. It's very convenient for shop owners who already use Square's registers, because they don't have to replace their whole register system, but it might not be the most intuitive for customers. The one at Blue Bottle was mounted to the counter, and you probably won't notice it unless you're looking to use Apple Pay.

The Blue Bottle baristas mentioned that they've seen a lot of interest from iPhone users, and once they point it out their customers have no trouble checking out. During our test, we saw least five people purchase coffee with Apple Pay over the course of an hour, and none of them had to ask where the reader was. A Square spokesperson said it's up to the individual store to let customers know what their payment options are.

And while Square pegged its new reader to Apple Pay, the reader also supports contactless payments from Android devices equipped with NFC and accepts physical chip-and-pin cards.

Making Apple Pay routine

While Apple is clearly an expert at building devices that solve problems, wading into payments hardware probably isn't at the top of its to-do list. So partnering with Square is beneficial for both companies: Apple gains a foothold with small businesses that wouldn't have transitioned to mobile payments otherwise, and Square gets a high-profile launch of a product it was gearing up to release anyway.

Businesses need to support chip-and-pin cards by October 1, otherwise liability for card fraud shifts onto them. Square wanted to offer those businesses a solution as simple as its original reader, which plugs right into an iOS device's headphone jack. The new reader accepts both chip-and-pin cards and NFC payments, and connects wirelessly to an iPhone, iPad, or Square Stand, taking up much less counter space than traditional payment terminals. It's also only $49, with a $49 card processing credit. The first 250,000 businesses to preorder get the new reader for free when it ships this fall.

It's unclear just how many of Square's millions of business customers (as specific a figure as the company will share) will upgrade to the new reader, but Square hardware chief Jesse Dorogusker told Macworld that many will be spurred to quickly adopt NFC and EMV because of customer demand.

"Buyers will slowly and then suddenly insist on paying with these new technologies," he said. "I never want a business owner looking across the counter at the buyer and saying, I'm sorry, we don't accept that.'"

Americans are getting fed up with card fraud--it seems like every month another retailer is hacked or your card data is skimmed. Apple Pay and chip-and-pin cards go a long way toward preventing fraud with enhanced security.

Apple is still waiting for a majority of the nation's 100 largest retail chains to get on board with Apple Pay, but if the small stores people frequent throughout the week start accepting contactless payments, it will establish an expectation that other merchants will need to meet.

"People don't shop at big-box retailers every day," Dorogusker said. "It's the stores you shop at every day that create habits. Ironically, these are the businesses that get left out of these transitions."