Square, Mobile Credit Card Processing and Jack Dorsey

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 sub prime 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.

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