For those of you not yet familiar with Square, it’s a somewhat unique credit card processing company. Unlike many technology companies working on revolutionizing payments, which are using Near Field Communication, Square’s stated goal is to replace the cash register.
While this is a worthy goal, we’re more interested in their ability to simplify credit card processing for the small business. If you accept credit cards, and you’ve tried to read a merchant services statement, you know that the fees you are charged make wireless phone bills look completely transparent!
Square has a simple proposition. You plug the free reader into your iPhone, sign up, and start swiping. They charge you a flat 2.75% rate, regardless of the card, and promise to fund your account the next day.
Sounds great. However, if you dig a little deeper, you’ll find that there are some issues for small businesses.
First of all, the 2.75% rate is only if you swipe the card. Good if you’re a retail business, but tough for others. If you key in the transaction, the rate goes up to 3.5% plus the $0.15 per transaction charge that everyone else charges. Second, you need to manually enter any credit card transactions into your accounting program (e.g. Quickbooks). If you use Quickbooks Merchant Services, the resident 800 pound Gorilla in the room, the transactions are automatically entered. Third, the system doesn’t have a bar code scanner or reporting yet, features critical to retail businesses. Finally, you’ll need a mobile device like an iPhone or iPad, not exactly a cheap proposition.
In the end, I think that many retail businesses will pass on Square for now because it has a long way to go before it has the same functionality as a true Point-of-Sales system. I also think most service small businesses (accountants, lawyers, etc.) will pass on the service because they don’t have their customers’ credit cards to swipe.
So – who is this for? It’s for dog walkers, tutors, street merchants, and others with relatively small charges (you avoid the $0.15 transaction fee) that currently can’t take credit cards. That’s a big market, and I believe the Square will be successful, but it’s definitely not for everyone.
