Square Rolls Out Flat Fee Pricing
August 17, 2012
Square announced Aug. 16 a new pricing scheme with a flat fee of $275 per month for merchants making less than $250,000 in annual card payments through the Square service. For a merchant running close to that gross volume, the savings over the standard 2.75% Square transaction cost would run to some $3,500 per year. Any Square merchant with a volume over $125,000 would save money.
No doubt, Square has examined its more than 2 million accounts and has found that there’s an opportunity there. And it may be that Square has some more margin to work with given how eager its upstream suppliers are to capture its volume. But it does look like, on the face of it, that Square is leaving money on the table in what is already a tight-margin business.
This pricing maneuver is significant because it extends the simplicity of its model even further into the domain of the traditional ISO and merchant services channel. We’re no longer talking about micro-merchants selling old stereo gear at flea markets or taxi drivers who might run $25,000 to $60,000 through Square in a year. That simplicity and price compression will be hard for a number of merchants to resist. Sole proprietors of a professional service may well find the standard pricing attractive.
An intriguing notion here is that the fixed fee schedule for transaction processing costs could be a training vehicle for other services sold on a fixed-fee basis to the merchant. While Square Register continues to expand its feature set, there will be need for niche market versions based on what could become a Square “platform.” It makes no sense for Square to build a version of Register for hair salons, but with exposed APIs and a business agreement, independent software vendors could build on a future Square platform and provide revenue to Square. While all of that is just a possibility, each of those value-added features is amenable to the fixed monthly fee approach.
If nothing else, Square as a competitor continues to prove it is far more than a one-trick pony. While it caused a stir when it announced its reader for mobile phones, more than a few observers were focused entirely on the mobile aspect and not the all inclusive transaction fee. Since then, the company has moved up market with its Square Register and built a connector to consumers through its Pay with Square geo-fenced app, the one that has gotten the attention of Starbucks and its CEO Howard Schultz.