I don't have any insider knowledge of Square specific to this, but it's not that hard to make a shim for a PoS to do all sorts of stuff. I contracted for a company in 2003 which did NFC/RFID readers with a little magnetic shim for existing magstripe card readers. You can also integrate at a deeper level directly into the PoS -- there is some customization needed, but a lot of it is generic.
Of course only problem is the penetration of Square registers.