Square, Mobile Credit Card Processing and Jack Dorsey

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K - we promised more on this and Dorsey and Square are moving along in Beta, press, pricing and more - let's talk!

First - take a look at our first blog re Dorsey's Square - the card reader, the premise and the promise of a very unique credit card processing product - with your iPhone or Droid.  Awesome.  What's new since our first writing...

Pricing - it's out.  Currently Square is charging 2.75% of the sale and 15 cents/transaction for card present and 3.75% for keyed transactions (card not present - always more costly).  As far as standard industry pricing goes - the swiped fee is high, the keyed is high, the transaction cost is pretty average. Square does not take into account standard industry discount pricing (qual, mid qual and non qual).  No costs for payment gateways though, or PCI, statements or monthly minimums - attractive...if you are a merchant with low processing volume.

A recent Fast Company article by Noah Robischon touts the device as an evolution and "champion" in the big bad credit card processing industry (we suffer this indignity a lot but I like this rag...must they???).  We AGREE with Fast Company - we like the product - it's cool and of a new era but take umbrage with a few liberties in the article and well, portions of the Square site and claims.

The article -

1. The "disruption that could be caused by Square in the convoluted credit card system".  Ah convoluted - agreed - we'd like things (i.e. all those interchange rates) to be simpler (like taxes maybe?) but credit card system?  card issuing and acceptance are far from one and the same - vague terms like these are confusing and muddy the waters.
2. "the card company"...same thing. This is? Visa? MasterCard? the issuing bank? the ISO (independent sales organization?) - all different interests and roles.
3. Merchant Fees and chargebacks are deducted at the month end making it difficult for businesses to gauge cash flow? (Square settles daily)  Um, anytime a merchant likes he can opt for daily assessments, in fact, if you have lousy credit the processor will insist - it's not a plus and inhibits cash flow.  Why pay daily when you can divy up at the months end?) - and todays processors give merchants 24/7 real time access to the daily details of their transactions, chargebacks, sales volume, and costs - todays merchant is more savvy than Robischon gives credit and so is the big bad processor. 
4. As a "result of the financial crisis, more and more of a microscope is being placed on this industry".  The scrutiny of interchange has rightly been in place for a long time - long before the financial crisis caused in large part by the subprime housing debacle.
5. Square has a more transparent pricing alternative.  Since Visa and Mastercard went public - wholesale pricing has been available to every size merchant - it doesn't get any more transparent than cost plus.
6. A Free "reader" - don't know a merchant account provider today that isn't giving away equipment - old hat.

Don't get me wrong - we like the concept of Square!  but with 1000 "Beta" users already, I doubt Visa or MasterCard is sweating bullets that this is what will evolutionize electronic payments. We still maintain that the concept and product serves a unique market - P2P payments and the small volume merchant.  Neat product - disappointing article.

The Square site and cost comparisons to a "typical merchant account" - oh come on - have you googled merchant account lately??

1. No contracts - pulllleeeaze - 17 pages of terms and conditions covering underwriting, card network rules, reserves, PSA (payment services agreement) that must be signed prior to processing, no guarantee or warranty that service will work or be available and well, so on. 
2. Free Reader - already addressed this - you want a free one - ask any merchant provider - no problem.  You want a free, wireless credit card processing terminal? - they'll probably give you that too....
3. Free setup - Google please - we've been providing free applications and set up for YEARS and so is just about everyone else.
4. Card present discount rate???  1.79 quoted by Fast Company as industry average - close - pretty ballsy of Dorsey to claim 2.9%.!

Lastly, when you don't get funded or your money is held in reserve - who ya gonna call?  Not Square - I guess you can email though.  I can think of at least a million merchants who definitely might not like that.

Come on guys - we like your product... it is techie, gadgety cool - but let's make sure we put it ALL out there.  Squares terms and conditions (contracts in laymen terms) also notes transaction limits on the site - but we can't find'em - crucial to processing merchants....don't want to get that big order only to have the funds held because of going over the established "limits".

We don't like the complexity of the industry any more than our merchants do (try training new staff!) - but the issue is not as black and white as some such as Robischon would make it out to be.

Mobile Credit Card Processing with a Wireless Credit Card Terminal.

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So we touched on the iphone wireless or mobile processing first - with Verifone's PAYware and of course Square . Revisit these pages for the pros and cons of each, where the products and services are at in development, and of course, the costs.

Let's jump to the top of the line then and discuss processing with a wireless or mobile credit card processing terminal - because it's different and these units have been available for some time.

What's the merchant application?  Anybody who processes cards regularly, johnny-on-the-spot.  You might be a busy contractor - with subs maybe or run a heating and air conditioning or plumbing service, delivery/service business/,taxi, etc. - you get the picture.

One example of a terminal for this purpose is the Nurit 8020 - an upgrade to the Nurit 8000 from Verifone. Keep in mind there are plenty of wireless terminals to choose from - but this one certainly fits many a wireless application (YES, XBS markets these terminals!).

This is a PCI compliant wireless credit card machine that uses the GPRS (General Packet Radio Service) network; a high speed data transfer service available in the US through carriers like T-mobile, AT & T, Cingular, etc.  The dependability of the coverage provided by these carriers is improving, though initially it was limited to metropolitan areas. 

So what do you get with the wireless credit card machine that you don't get with iPhone processing?  an all in one processing solution - mobile, light weight, compact that includes -

• a thermal printer (drop a paper roll in and away you go)- iPhones do not have printers (they can connect to one via blue tooth compatibility but the solution "grows bulky").  A receipt of the transaction can certainly be "emailed".
• an internal pin pad - for pin based debit (fastest growing payment method today....).  iPhones cannot process pin based transactions currently.
• Wireless options include  GPRS and Wi-Fi (WAN).
• Large, backlit graphical display, 18 key keypad, touch screen and stylus for electronic signature....

So down to the ditty....what's it cost, as it relates to our iPhone processing options?

The terminal can cost up to $650 - less if you buy from the merchant account provider - who often discount the equipment (at least XBS does).  I guess it would be fair to compare that to an iPhone or Blackberry cost - $300 and up possible.  Of course the terminal cannot be used as a phone.

You must pay for the monthy wireless connection - $15-$20/month should cover it. If you didn't know - you pay the wireless fee PER terminal.  In the case of the iPhone remember - it would be typical to pay for your phone service AND a payment gateway ($10-$20/month).  The wireless credit card terminal sends data direct to the Visa/MasterCard network via the GPRS (remember AT & T, T-mobile etc. wireless provider) - NO payment gateway required - no payment gateway fee.

The wireless service charges a transaction fee - .10/transaction approximately.  This transaction fee is on top of the transaction fee you owe the payment processor - you do need a merchant account with this terminal.  Merchant account fees are dependent on who you do business with - we recommend us.

Time to create a comparison chart I think.  I'm on it - next post.  In the meantime - for the true, mobile merchant with a host of "hired hands" delivering goods and services that require payment collection at the point of delivery - a wireless credit card processing terminal is a safe bet.  It's a swiped, real-time authorized transaction with card present low rates - with a receipt at the ready for your customer.  Professional, secure, money in the bank....you can't beat that. 

VeriFone's PAYware Mobile - Mobile Processing with Apple's iPhone

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So we promised to continue our "mobile merchant account" discussion, starting by unveiling the latest and the greatest (see our take on Dorsey's Square for the iPhone).

Next up is what the payment's world is touting as Square's competitor in the marketplace - VeriFone's PAYware Mobile (VPM)- a complete processing solution for yet again - Apple's iPhone.  What's the ditty? 

Three components of the VPM solution:

A durable card reader that slips over Apple's iPhone.  Allows merchant to to process card present transactions - lowering the cost and risk of the transaction.

The PAYware Mobile Gateway - a secure payment gateway for transaction processing - connected to the First Data platform but touted as compatible with other processors with some "app manipulation" (we're okay with First Data!)

The PAYware Mobile App - a free application downloadable to your iPhone - when paired with the gateway and card reader - enables the iPhone to accept secure credit card payments - anywhere, anytime.   

So what's the difference between Square and this brand new smoking hot mobile processing solution from VeriFone?

• Square's still in Beta.  Testing 1, 2, 3.  PAYware is on.
• Security - VeriFone is a trusted leader in POS solutions in the electronic payments industry AND the PAYware Mobile card reader encrypts the data at the swipe - (see PCI DSS folks). Square security is iffy - no encryption that we no of....Mr. Dorsey specializes in social media - i.e. Twitter, NOT credit card processing.
• Currently - the VeriFone solution only works with the iPhone 3G or 3GS -Squares method (hardware plugs into the headphone jack) is preparing for further mobile device compatibility.  Reviewers so far however, seem to like the solidity and fit of the VeriFone card reader when compared to the Square.
• Costs - So far VeriFone is noting a $49 activation fee and $15/month for the payment gateway and .17/transaction fee
• Merchant Account - you need one.  Doesn't come with the product.  Hmmm - this means -

1. VeriFone PAYware Mobile costs are on top of the costs you are already paying for your merchant account or will pay when you get one.
2. It negates some of the unknowns and drawbacks we outlined regarding Square, it's costs, (not sure) and limitations, i.e. ticket parameters, reserves, lack of fund control, timeliness of funds, impact on cash flow (again - we just don't know and when it comes to business and money - we NEED to know).

We still contend - like others, that Dorsey's Square seems far more suitable for the now and again, person to person payment than for a small business looking to increase revenues and cash flow with quick, efficient, and SECURE credit card processing through use of Apple's iPhone - all depends on your needs I guess.

That get's back to what we do! Electronic payment professionals at XBS assess the needs of each individual business we work with - we'll tell you straight up and point you in an "educated" direction. 

When it comes to processing electronic payments, ignorance is not bliss - it's risky.   

Mobile Merchant Accounts, P2P, Square and All That Jazz

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All of the December 2009 and January 2010 credit card processing industry rags are touting mobile payments as "the thing" in 2010.  Growth, applications, and opportunities are arriving rapid fire - and so we're going to try help our merchants sort it all out (I'm dancing as fast as I can).

So....let's launch with the newest gadgetry that's creating a great deal of buzz...Square.

Jack Dorsey, founder of twitter (very cool we agree) -announced a new venture - development of mobile payment technology compatible with Apple's iPhone called Square.  The hardware and service is in "beta" mode (just testing so chill folks) but it sure has raised a ruckus of attention in the online community. 

The ruckus is two fold -

One is WOW that's mobility in a small convenient package.  The Square, is little, plugs directly into the IPhone, and allows the iPhone user to accept a credit card payment from anyone, anywhere - swiped (lower risk).

Two - it comes with the merchant account with a simple, flat rate transaction fee (no rates on the website so we only have rumors and tweets for info).  Excuse me?  No application, no underwriting?  Fascinating.

Jeff Green, Editor-in-Chief of Payments Source - talks about the device and service in his Editors Letter in the January/February 2010 issue. It's exciting and Dorsey's getting a lot of publicity, but things are all quite vague when it comes to the payments processing and Green notes in his letter that perhaps Square will act as an payments aggregator, such as PayPal, running all of the transactions through their own merchant account.  All still up in the air - but a quick gander at the site turns up a few vital points for our small business friends always looking to reduce costs we know -

• Square touts No contracts - I printed 17 pages worth of Square "Service Agreements and Payment Services Agreements" right off the site.  Most of us don't need to check with an attorney to know what that means - legal agreement = contract.  There might not be a length of service contract but anybody taking money from and delivering to, bank accounts electronically is working on a contract - has to be.  In this case apparently there may even be two - one with square and if they deem it so, one directly with the payment processor.

The Square Service Agreement -

• No warranty - this one's pretty clear - at this poing in time Square does not guarantee it's service - for availability, dependability or risk. No mention of PCI DSS. 
• Communications - electronic only currently - no matter what your question or issue - no calling'em.

The Payment Services Agreement-

• Reserves - "Reasonably determined" - new accounts have to have one (I'm guessing that's everybody) equal to 14 days of sales activity plus pending disputes.  The reserve could be raised or removed based on activity, credit reviews etc.   If you don't keep sufficient funds in the reserve it may get funded from your Square Account, i.e. credit card processing sales.
• Transaction limits - Square accounts have transaction limits - no idea what these are yet - stay tuned.
• You need to provide a written receipt to your customers for any transaction over $15 - you can give the customer the option to decline it of course and you can offer an email receipt, but not in lieu of.
• Availability of Funds - doesn't say when you get your money - 2 days? 3? 5?  just that Square can limit your access to your Square account funds if they feel they are at financial risk or other agreement parameters are in dispute.
• Fees - doesn't say. 

Ok - so remember Square is in Beta - I'm sure they'll work out these kinks but at quick glance we can't help but think these current questions raise some real issues for businesses.  The application does seem fun for P2P (person to person) payments - think garage sales, girl scout cookies, PTA fundraisers, etc. or maybe the handyman, lawn guy, tupperware and avon lady, that doesn't do enough processing to warrant their own merchant account but wants to offer the convenience of credit card sales.  That's cool. 

The term small business is pretty broad though.  Most merchants we service need electronic payments professionals to navigate POS equipment, funding and value added services above and beyond the "merchant account". 

Today there are a number of overwhelming factors that impact a merchant's ability to process credit cards securely AND profitably.  Merchant account agreements are indeed complex and typically include 8-12 types of fees depending on the type of card used in the sale as well as the method and equipment used in the processing.  Cash flow, prompt funding, fees and rates, PCI DSS are essentials for processing success and a casual approach isn't recommended. 

We'll be hearing more about Square for sure - I'll keep you posted - in the mean time - think payments professional to answer your processing questions about rates, equipment and "going mobile with your business".