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Mobile Merchant Accounts, P2P, Square and All That Jazz

by | Feb 24, 2010

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 point 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 ratesPCI 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”.