
Square Drops Per Transaction Fee - ssclafani
https://squareup.com/pricing
======
zdw
Square is where the financial industry should be going - it offers an
unambiguous service at a reasonable, flat price to all it's customers.

My one feature request - payment only logins, so people in the field could
take payments into a central account, but not manage that account.

~~~
zbrock
Definitely on our todo list.

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ztan
This may be a dumb question, as I'm not very familiar with how these things
work. Why do they charge less when the transaction is a physical swipe 2.75%
vs 3.5% + 15¢ if you enter numbers manually? Does it actually cost Square less
when you swipe? If not, what is the idea behind this encouragement of physical
swipe?

~~~
Zev
_Does it actually cost Square less when you swipe?_

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.

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rottencupcakes
Is this verifiable? Is there extra information on your magnetic strip? Could
you not just push the same signal as the credit card numbers into the iphone's
microphone jack?

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dangrossman
You can always lie and send the code saying it's a swiped transaction without
swiping a card. The risk there is losing the ability to ever accept credit
cards for the rest of your life. If you violate a policy like that, you're
added to the Terminated Merchant File. Not only is the business's information
placed in the file, but the names and social security numbers of every
principal of the business. MAPs will check the list before approving a new
account. None of the business's owners will be able to accept credit cards
again, even if they form new companies.

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rumpelstiltskin
This is a gamechanger if your transaction price is lower than $5.45 _(EDIT:
the tipping point where the 2.75% accounts for a larger portion of the fees
than the $0.15)_. The further above this price you go, the more negligible the
$0.15 savings per transaction becomes (compared to having a lower % of the
total transaction).

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?

~~~
pitdesi
I think your math is a bit off... How did you come up with $5.45? Play with
different scenarios - for smaller merchants with low tickets (<$15) Square can
make a lot of sense: <http://feefighters.com/square-calculator>

~~~
rumpelstiltskin
$5.45 is the tipping point where the 2.75% accounts for a larger portion of
the fees than the $0.15. _(EDIT: added to original comment)_

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.

~~~
varikin
I can't say I speak for Square and I definitely don't know the details of
their contacts with the credit card processors, but 2.75% is probably limited
by what they get charged to process the credit cards. I would hazard a guess
that they got between 2 and 2.5% and are skimming the other .25 - .75% off the
top for themselves.

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.

~~~
modeless
My card has unlimited 2% cash back. If it was possible to get card processing
for less than 2% I could make money paying myself.

~~~
jobenjo
What card is that? (Just curious--sounds like a great deal).

~~~
modeless
I got this one through Charles Schwab Bank. I'm not sure if they're still
offering it, but they definitely still offer a debit card that reimburses 100%
of all ATM fees.

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il
This is absolutely huge. Having gone through the suffering of getting a
merchant account recently, the amount of subterfuge, hidden fees, etc in the
industry is staggering.

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.

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dmpayton
I really like the idea of Square, but...

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)

~~~
bigmac
Take a look at this short video:
<http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2649>

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.

~~~
dmpayton
Awesome, thanks for posting that.

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.

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stuartjmoore
I haven't used it in the field yet, but I just received my Square device.
Great hardware and software for something I thought was vaporware.

The $1 limit on credit cards is annoying if you want to sell something at
$0.99 though.

~~~
beagle3
> 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.

~~~
detst
[Note: I personally prefer round prices but...]

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.

~~~
beagle3
> There's nothing confusing or deceptive about this practice.

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.

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oasisbob
This is great.

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.

~~~
othermaciej
The Durbin amendment is terrible for consumers though. If banks that issue
debit cards can't make their money on interchange fees, then it will be harder
and more expensive for consumers to have debit cards. If fewer people have
debit cards, then this is ultimately not a net win for merchants.

Short version: price controls are still bad economics.

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puls
This is a bigger deal than it seems at first: until now, Square has only been
competing with other card processors on simplicity. Now they're competing on
price, too.

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felipe
_"Simply revolutionary"_

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.

~~~
JshWright
You can think of _no_ other uses for a smartphone?

~~~
felipe
My point is that Square only makes sense for a merchant who:

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.

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hkuo
My first reaction was "what's 15 cents?" But a quick calculation shows how it
can really add up for a small business operator. Example, 50 transactions per
day, that's $7.50 saved per day. Just weekdays alone, that adds up to $150 per
month. Nothing huge, but every bit helps.

~~~
trafficlight
15 cents is huge if you are only charging a few dollars per transaction. The
Square reader is awesome for small merchants at farmer's markets and swap
meets. Most of those transactions will probably be under $10.

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nnutter
Wait? Why didn't Square increase their fee to 30%? I hear that's all the rage!

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.

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joenathan
There is still a 15 cent fee if the card number is entered manually...

~~~
dotBen
<http://news.ycombinator.com/item?id=2251613>

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wildmXranat
Saw the article, got excited. Read the news, felt even better. Read the FAQ
and saw that it's not available in Canada. This would be ideal for so many
people I know, ouch.

~~~
zbrock
We're working on it!

~~~
whatusername
Australia pretty prety please.

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pitdesi
This is a substantial game-changer in this market. The sub-$15 merchants
should use Square over a merchant account. My guess is that square is looking
to build critical mass but is losing money at the lower end of the spectrum
(quick math says on transactions below $6.83), unless they have managed to
negotiate a deal with MC/Visa (unlikely).

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pitdesi
This is a badass game-changer. FeeFighters launched an updated calculator with
Square's new pricing... Check it out to see what makes sense at different
price points <http://feefighters.com/square-calculator>

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Entlin
That's still quite a lot considering that square aims at people casually
exchanging money and is in competition with cash.

Square, $100 changing hands 3 times: $91.97 Money, $100 changing hands 3
times: still $100.

~~~
zdw
You're assuming that people carry around $100 to spend on something.

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.

~~~
jmm
Agreed. Ever go to a farmers market and run out of cash? That sucks. And
Square is helping to fix that problem. Sure, some farmers might still prefer
cash only (since the market entity usually already takes a cut off the top),
but at least it gives farmers who aren't selling out of certain items the
possibility of increasing their sales.

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...

~~~
getsat
If I recall correctly, CC companies do not allow businesses to charge an extra
fee to take card, but businesses are not forbidden from raising the base price
and offering a cash discount. During my time in the US, I saw many gas
stations showing a "CASH PRICE" next to the regular price.

~~~
barake
I can confirm Visa does not allow you to charge a premium/pass on fees but a
discount is allowed for cash and check. MasterCard, American Express and
Discover let you charge any sort of fee basically. My employer does not accept
Visa due to the terms (and it's really annoying - Visa is what all the banks
in town issue).

