Square is disrupting the payment space

Square is completely disrupting the payment space and their most recent announcement of fixed pricing appeals directly to small businesses with point of sale systems who stand to save $300 a month.  A closer look paints the picture of a pretty solid deal, but not for everybody.

For over 60 years, credit card processors have nickel and dimed small businesses taking a % of the card transaction as a processing fee.   Today Square announced a 0% processing fee for $275/month for merchants who process up to $250,000 per year.  At first glance this sounds terrific, but a closer look actually reveals some risk.

A closer look at this deal reveals that a merchant needs to have a minimum of $120,000 per year to break even with this new flat rate.  With a top end of $250,000 in transactions, the total amount of savings is capped at $3,575 per year.

For Square it is clear that this is an acquisition strategy designed to steal customers from entrenched players like VeriFone, and NCR whose systems can cost quite a bit more.

Square’s pricing is simple for businesses of all sizes. Accept credit cards anywhere with easy to understand rates. Know exactly what you pay.

For merchants, the added risk and upper limit deal restrictions might make the flat rate a bit harder to swallow and they are likely to remain with their current card processing solutions.  For businesses that qualify, its clear that the pricing is much easier to understand and the savings is an added bonus.

The new simple flat pricing scheme is a disruptive move from Square and likely to revolutionize the industry.   With the recent Starbucks deal, this announcement can be seen as Square’s reaffirmation that small businesses are a top priority.

By joshkerr

Josh is an 8x startup founder and angel investor.

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