Square is finally delivering on its promise of an encrypted reader. According to VentureBeat, new dongles being shipped by Square are fully encrypted.

Reader encryption has been an issue in the past with Square's mobile POS system. It led to a nasty fight between Square and POS provider (and Square competitor) VeriFone a year ago. VeriFone's CEO Doug Bergeron went so far as to call for Square to pull its product lest the readers be used for stealing consumers' credit card information. Square responded by saying encryption provides little value for a credit card with the number printed right on the card. Square added that security features within its mobile POS app made it secure without a need for encryption.

Square's contention didn't address the issue of Square readers being used on spoofed apps — or that the payment card industries standards call for full end-to-end encryption. That fact only became an issue when credit card network Visa made a strategic investment in Square. That's when Square seemed to yield the argument and promised to provide encrypted readers by sometime last fall. However, no encrypted readers were forthcoming until now.

No telling if encrypting the new dongles will increase the cost of the readers sent to merchants. They're currently provided free to merchants who sign up for the service. (Dongles sold through retail partners cost about $10, but merchants receive a $10 credit to their accounts once they sign up and start processing payments.) A source familiar production of the devices said the cost for Square to make the dongles has likely jumped from around $.05 to $.50. That tenfold increase may make a significant difference considering how successful Square has been in getting readers into the hands of merchants. The company has signed more than 1 million merchants. Also no word yet from Square on whether or not the unencrypted readers will be replaced.

For more information, see the POS research center.