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Comment by inthewoods | Hacker News Reader

"Square Wallet provided a very magical experience but didn’t have a lot of the utility value,” Square’s Ajit Varma said in a recent interview."

I'll admit it - I threw up a little bit in my mouth when I heard "magical" in this context. For me, utility is the magic.

And then this: "That said, the company raised some eyebrows a few weeks back when it said it would charge businesses eight percent for these order-ahead transactions, rather than the 2.75 percent flat rate for most credit card purchases that run through Square’s platform. The reasoning, it said, was that the feature would help bring in new customers."

8%? For a SMB operating on likely thin margins? Merchants would be crazy to sign up for this service.

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For the record, these "order-ahead transactions" are what services like Just-Eat in the UK, and GrubHub in the US, do for takeaways. Here in the UK, Just-Eat charges 11% plus VAT, and they still have huge amounts of takeaways sign up for them, because when people like me think "I want takeaway", I go to Just-Eat's website. I see that GrubHub charges 13.5% on average.

I don't know whether that'll translate well to things other than takeaway, but Square obviously thinks it will.

When you say "11% plus VAT", are they charging the consumer or the business owner?

They charge this business owner, usually 13.5%. It's up to the owner to forward that cost to the consumer.

I think "magical" is a reasonable term for it. A lot of tech marketing involves people being wowed. Apple, for example, is great at it.

Utility is definitely the long-term driver, but I'm eternally surprised how far a product can get on "magic". 3D, for example, has been running on that since at least the 1950s.

I'll quote Don Draper here: "Technology is a glittering lure"[0]

[0] - https://www.youtube.com/watch?v=DHUUyx0d7qw

Apple is great at making something that has a lot of utility and then making it look/work great as well. To me that is what defines magic. No utility + pretty interface = unmagical.

the premise is, it is marketed to merchant as 'the business you would not have without us'. Merchant will treat this as 'referal commision + payment processing'

And pay 8% for the service? I'd think at such a high rate, having that extra business doesn't really strike me as worth getting at that point.

Disclosure: I work for a company somewhat in this space.

If their value proposition is true (the customers would otherwise not have come to you), then it is 8% off sale that you otherwise would not have received. Paying typical card fees, but receiving no sale is a far worse proposition.

If every single order you get through it is an order that you definitely would have never received without the system, then it's a good deal. Other than that, it's maybe good once, but when customers start using it on a repeat basis, there's no benefit to the store.

They're justifying it as a customer acquisition expense, but you have to pay for it in perpetuity. Not good.

The problem I see with that approach is that there is no guarantee it will bring in new customers. Seems just as likely that it will actually bring existing customers. Second, if they are trying to get traction, then they need the merchants on board to create enough supply side to have ordinary consumers want to download an app and use it. They just created friction for merchant sign-up.

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