What Will We Learn From Square’s Rate Increase?
Tomorrow Square will update its fee schedule for in-person transactions from 2.65% to 2.75% plus a $0.10 per transaction fee. While this may not seem like a significant change, check out our previous post to see how the math will affect small businesses. We also have to remember that Square isn’t a traditional payments processor, as we posted here. https://idealcost.com/square-for-credit-card-processing.
With the updated pricing, we hear thousands of stories across the country of the real-world impact of Square’s change.
Small businesses, such as coffee shops and quick-serve restaurants, will see their profit margins diminish or close their doors unless they significantly increase their prices. Will that affect the demand for their products? Only time will tell.
How Did We Get Here?
To properly assess how tomorrow’s events will impact businesses across the country, we have to remember where we started. Square was founded in 2009 by Jim McKelvey and Jack Dorsey. It was originally devised for mobile businesses to occasionally accept credit cards at the point of sale, such as an outside market or service call. It was originally a simple piece of plastic that plugged into a smartphone’s headphone jack. Square would give them away or sell them for almost nothing at cell phone and office stores.
Addicted to Square
Square was originally a twofold disruptor. The technology was far superior, and people loved the flat-rate model. In many cases, businesses would be willing to pay more for the peace of mind of having a flat rate. Square’s disruption allowed it to attract and raise many millions of dollars from big investors, including Visa, in its early stages. Square has never profited during its ten years in business but has seen enormous customer adoption. Armed with new tools such as a fully integrated Point of Sale (POS) System, Invoicing Platform Loyalty Program, Payroll, and more, Square has wrapped its tentacles through its clients’ businesses. Business owners are addicted to Square, just like they would be addicted to Facebook or Twitter, which was also founded by Jack Dorsey. Square wants to control commerce like social media companies control content. Square may already be making money from selling consumer data or might choose to do so in the future.
Nothing much can be done. Square chose to grow their company and have been very successful. Much of their losses stemmed from credit card processing of small average ticket businesses. They are beholden to their shareholders and moving quickly towards profitability. They can no longer strategically sell credit card processing at a loss to some or all of its market. Businesses now have two options. First, they can stay with Square because you’ve enjoyed the sugar high of low rates for so long, and your business is entirely dependent. Second, they can look for a credit card processor who may better meet their needs.
Don’t Take On The Credit Card Processors By Yourself
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank, or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service, or technical difficulties. Before you consider switching credit card processors, see if you qualify for our small business services monthly savings program. Upload your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.
If you are opening a new credit card processing account or switching credit card processors, feel free to contact us for a free consultation. IdealCost.com can help secure the best terms and fees based on your specific needs.