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A shot across the bow against Square. This will be very interesting. Payments has always been a race to the bottom, I wonder how quickly rates will drop for POS payment providers now that Stripe is going after that business and directly against Square.

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I'm surprised either Square or Stripe would do well in the "card present" space. 2.9% + 30 cents is pretty big markup if you're "card present".

Edit: See comment below, apparently the 30 cents is now 5 cents for card present. Helpful, though doesn't necessarily close the whole gap, depending on transaction mix.

Could you clarify? Is this markup only on card present transactions?

It's specific to the US. Within the US, if have your own merchant account, "card present" is a lot cheaper than "card not present".

So far, companies like Paypal, Square, and now Stripe, don't pass those savings on. They all have one rate that doesn't differentiate.

More importantly, fraud rates are much lower with CP than CNP. If the Visa/MC in the US goes with a PIN-type system like the rest of the world, fraud rates drop to near zero, which makes Card Present insanely profitable for them.

Card-present transactions are typically cheaper, because the risk of fraud is better mitigated. With chip cards, the fraud risk for card-present is almost entirely in physically stolen cards. (Sophisticated shops could duplicate magnetic stripes. That's a lot harder to do with chips.)

Compared to online, where all you have is the card number and the CVV, both of which are easily duplicated. And this is why tokenization is such a big deal. Tokenization means you don't store the actual card number, and the token you do store is tied directly to your merchant, so it's not widely reusable.

For low value, high volume merchants, Square's rate is extremely competitive.

I don't see how that's possible. Low value would skew it even more versus 2.9% + 30 cents, because you'll have more debit cards for low value transactions. Debit card transactions (pin or not) are cheaper post Durbin amendment.

Open to stats that say otherwise.

> I don't see how that's possible. Low value would skew it even more versus 2.9% + 30 cents

Because that’s not Square’s rate, they charge a flat 2.75%.

And a regulated debit card is around a 10 cents flat fee. No percentage.

Square's fees are pretty high unless you are processing less than say $150k a year.

From the landing page: "In-person payment processing: 2.7% + 5¢"

(may be getting A/B tested if you're seeing something different?)

Ahh, that's helpful. I went to the main pricing page. It is on the landing page, as you say...but really far down the fold.

actually, their pricing is 2.5% +10c for custom in person payments (Reader SDK) https://squareup.com/us/en/developers/reader-sdk

Square is 2.75% with no fixed fee. This is by far the best rate you can get for low amount charges and why Square enabled an entire new category of credit card merchants like fast food.

That's not that low for card present. Except for very low volume sellers. What fast food companies are using square? I've only seen square used in small shops.

For $5-10 purchases you'd cut your CC fees in half. That's a lot. Pretty much every food truck and many non-national fast food restaurants and cafes use it.

card present fees are vastly different (lower) than not present, and there is usually no fixed fee.

And PayPal with their announced purchase of iZettle

I also thought it was a race to the bottom, but the rising valuations of payments companies is telling me otherwise.

All tech companies are rising. It's similar to the dotcom boom in my opinion where all tech stocks went up and everyone thought they were stock picking geniuses. Don't attribute it to anything more than this.

All it takes is for a single payment provider to start dropping rates and it will follow. Right now there hasn't been one yet, because they're know it's mutually-assured destruction. But if someone can get a handle on fraud rates, they can cut the rates down to very thin margins and work off a volume.

It is a race to the bottom.

Payment processing has become so commoditised that you need huge scale.. see the Worldpay/Vantiv merger.

What Square and Stripe are doing is adding value and simplifying the complexities around payments. They will only be able to rinse small merchants with the high fees who need the equipment also (can't afford bespoke systems).

The larger tier one retailers get payments for near zero fees as they are literally just consuming the processing and they bring their own system/hardware/management.

I work at Stripe. This isn't really competitive with Square—very different customers.

I worked in payments. Respectfully, you really shouldn't be talking on behalf of Stripe.

It's clear that a card present product, which I believe is new for Stripe, is in direct competition with Square. Even if right now it's not being marketed towards the same customer base as Square, it's clear that with a few tweaks of the app plus a change in the manufacturing process, you could easily create Square-like POS systems. Why would Stripe leave out such a huge, proven market when it's clear this product is a stepping stone towards full POS systems?

Your average pizza shop isn’t going to build a POS.

No, I meant Stripe will build it. It's not much different from what they just created.

yeah i don’t see how this isn’t obvious.

Could you clarify? I'm guessing you mean..

Square: Small/individual merchants, Etsy style physical shops, trade shows, etc.

Stripe: large retailers, grocery stores, stores with many locations etc.

What large retailers are using stripe? The fees would be too high.

I work in payments... I regret to inform you/proudly announce that you now compete with Square, just one-step removed.

I work at Square for what it’s worth..I disagree. Stripe set out to create the perfect payments service. Square set out to create the perfect physical POS. The next logical step for both companies is to spread out in the market more. We’re going to bump heads sooner or later being in the same industry.

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