Square Rolls Out Flat Fee Pricing

by George Peabody 0

Square announced Aug. 16 a new pricing schemewith a flat fee of $275 per month for merchants making less than$250,000 in annual card payments through the Square service. For amerchant running close to that gross volume, the savings over thestandard 2.75% Square transaction cost would run to some $3,500 peryear. Any Square merchant with a volume over $125,000 would savemoney.

No doubt, Square has examined its more than 2 million accounts andhas found that there’s an opportunity there. And it may be thatSquare has some more margin to work with given how eager itsupstream suppliers are to capture its volume. But it does looklike, on the face of it, that Square is leaving money on the tablein what is already a tight-margin business.

This pricing maneuver is significant because it extends thesimplicity of its model even further into the domain of thetraditional ISO and merchant services channel. We’re no longertalking about micro-merchants selling old stereo gear at fleamarkets or taxi drivers who might run $25,000 to $60,000 throughSquare in a year. That simplicity and price compression will behard for a number of merchants to resist. Sole proprietors of aprofessional service may well find the standard pricingattractive.

An intriguing notion here is that the fixed fee schedule fortransaction processing costs could be a training vehicle for otherservices sold on a fixed-fee basis to the merchant. While SquareRegister continues to expand its feature set, there will be needfor niche market versions based on what could become a Square”platform.” It makes no sense for Square to build a version ofRegister for hair salons, but with exposed APIs and a businessagreement, independent software vendors could build on a futureSquare platform and provide revenue to Square. While all of that isjust a possibility, each of those value-added features is amenableto the fixed monthly fee approach.

If nothing else, Square as a competitor continues to prove it isfar more than a one-trick pony. While it caused a stir when itannounced its reader for mobile phones, more than a few observerswere focused entirely on the mobile aspect and not the allinclusive transaction fee. Since then, the company has moved upmarket with its Square Register and built a connector to consumersthrough its Pay with Square geo-fenced app, the one that has gottenthe attention of Starbucks and its CEO Howard Schultz.