Square Drops Per Transaction Fee
squareup.com
squareup.com
My one feature request - payment only logins, so people in the field could take payments into a central account, but not manage that account.
If this system gets a lot of traction, financial institutions (such as Visa and Mastercard) suddenly open themselves up to quite a bit of new competitors, or don't they?
Disclaimer: I'm not from the US, not too familiar with the US system
Yes. Credit card processors charge a lower fee if you can say that you got the number from swiping a card, rather than manually entering it in.
If you have the card physically in hand then there is less risk that the transaction is fraudulent (for a start, the card holder is presumably present)
Swipe(total) Fee = Switch Fee + Interchange Fee
For eg. I sell a service (in the offline world) at $50 and avg about 9-10 sales per day. With the removal of the transaction fee, I would save about $1.50 per day. With a lower % of the total transaction, say 1.75%, I'd save about $7 a day.
What about an option for business owners to pay a transaction fee but get charged a lower % of the total transaction?
There are merchants who do a small # of transactions a day w/ each transaction being significantly higher than $5.45. For these merchants, dropping the per fee transaction results in negligible savings. A lower % is what matters to them.
Basically, Square is great. It'd be even better if they offered another option.
My father in law runs a small business and has shopped around for credit card processing in the past. He has a deal around 2% at the moment. If you are diligent about shopping around and being part of merchant groups and such, 2-2.5% is doable. If you are not diligent, a business will probably get 2.5-3% per transaction. If the business is huge (national chains) with lots of negotiating leverage, they can do even better. Mind you, this number off the top of my head are ballparked from anecdotal experience.
My guess is Square negotiated a percentage when they started. They have since proven their business and are processing enough transactions that they were able to renegotiate a better deal. Then they passed on the savings. I am sure they would like to drop to 1.75% if they could, they still have to pay the credit card processors and make some money. But that is all conjecture.
If Square acts as a gateway and merchant account with a flat, easy fee at pricing comparable to PayPal, they could make a big impact in the industry.
One of the blockers to launching my side-startup is the financial investment required to form the business and setup a merchant account. Money is tight for me, and I'd like to keep my costs to a minimum until there is some positive cashflow.
If Square offered an API, I could launch and start accepting money now, holding off on the business formation beyond sole-proprietorship until paying customers have validated my idea. Hell, they can keep the extra $0.15 for that.
So what's stopping Square from doing that? Could they build that out, or are they blocked by, e.g., regulations? (I know nothing about operating a payment gateway)
Square decided to do the hard stuff first. And they pulled it off! That's what's so amazing about this company. I just hope that when they build their API that they do a PCI compliant vault that adheres to the Data Portability Standard. (Or, at the least, integrate with Recurly, who could handle the subscription logic and provide the PCI compliant vault.) And, of course, their chargeback management processes need to not suck.
If they do, there would be no reason to ever, ever pick anything other than Square for any side project all the way up to a fairly large (>$100K/month) web app.
It looks like an API is on the way, as one of their roadmap items. It should be no surprise that they're going to do an API, given that their CEO is the creator of Twitter. Twitter is basically the textbook example of explosive growth due to API usage.
I'd really love to know what the ETA is on a webservice API, even if it's just a rough ballpark. I sent them an email asking about it, hopefully they'll be able to provide further details.
[Edit] If it came down to it, I might consider an approach like Lanyrd: launch with a donate button, and all donors get special perks and some extra free time when it's time to roll out a proper payment system.
The $1 limit on credit cards is annoying if you want to sell something at $0.99 though.
Why do you think selling something for $0.99 is legitimate? I know it's common, but it is the practice of confusing the buyer "Oh, it's just 90 cents" when they are actually paying a dollar.
I would be extremely happy if Square (or for that matter, everyone) would only let you charge (say) at 10 cents increment for prices up to $5, at 50 cent increments up to $50, and at $5 increments above $100.
The merchant should actually have to pay for it (to the tune of $4.99) if they advertise a product at "less than $100". They shouldn't be able to charge $99.99.
There's nothing confusing or deceptive about this practice. The price is right there. Why would someone interpret something clearly advertised as $0.99 instead as costing $0.90? The reason merchants do this is because of different emotional reactions and buying behavior.
Whether or not it's effective for what you're selling or the type of people you're selling to is another question but it's a legitimate practice as far as I'm concerned.
This is a matter of opinion, of course, but in my opinion, it is deceptive.
The only reason _anyone_ is doing it is that it has been shown time and again that mentally $4.99 registers closer to $4 than to $5 (and $199.99 registers closer to $150 than to $200).
It doesn't register that way with me, because I trained myself to ignore it - I grew up in another country, where this practice was not widespread while I was growing up. When it started appearing, most people trained themselves to ignore it, but the younger generations are vulnerable to it.
Now that I am living in the US, I see that most people my age are also vulnerable to it.
Furthermore, in that country I grew up in, the law says that any advertised price must be: (a) inclusive of all taxes, charges etc. (that is, in a cash or credit transaction for the item advertised, the charge must never be more than the advertised price under any circumstance), and (b) in the same font/style/weight and at least 20% larger than any other descriptive price of the item (before tax, finance charges, etc).
Do you consider advertising a $1 27" television with a super small fine print saying "+$900 shipping, handling, state tax; included even if you pick up in store" false? I do, and I think it's in the same class.
All the info is there in both cases, and both cases are designed to leave the impression of a lower price than the item really costs.
- brand A versus brand B - retailer versus brands - retailer versus employees
the customers are just minor players in this game
One of the main reasons I've been rooting for Durbin's interchange fee amendment to be implemented is because interchange fees stifle pricing innovation. For debit card transactions, the interchange fee is -- on average -- 1.8% . This goes to the bank, and becomes the bare minimum for swipe fees.
Assuming that the Fed goes ahead and implements their proposed rules, interchange fees will drop to less than $.12 for most debit transactions. Square and other progressive providers can pass these savings on, if they so choose.
Short version: price controls are still bad economics.
I don't understand why a 0.15 drop is such a big deal, considering the service requires an expensive iPhone (or Android) and a major mobile plan.
1. Already has an iPhone or Android; and 2. Takes the order him or herself.
Reason #2 alone already excludes the huge majority of businesses. Inside that minority, reason #1 excludes small-size vendors who cannot afford a smart-phone.
Sure, Square has its place as a niche, but it's hardly revolutionary.
P.S. Thank you Square! I will be (as always) recommending this to my family members who run their own business where a large portion of their revenue comes from trade show sales.
Square, $100 changing hands 3 times: $91.97 Money, $100 changing hands 3 times: still $100.
I think this is still a business product - though your business may be selling some random stuff at a flea market.
The sweet spot of Square is people who are selling things that cost more than what is in most people's pockets at any given time, and want to be able to do it from anywhere.
Anecdotally, they sell 10-12 more CDs at a show when they are able to take credit card payments.
Other use cases??? Flea markets, artists, street vendors, school functions (fairs, car washes, etc.), fund-raising or charity things, paying a cover at a party or at an art/music venue, masseuses and the like, gambling debts and poker games... I could go on. One thing I'm curious about is whether Square forbids min charges or charge-ups the way credit cards do ("you owe me $100, but I don't want to pay the fee, so pay me ~$103 instead"). Not that they could really enforce it any better than credit card companies...