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Square introduces monthly pricing

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Re: Square introduces monthly pricing

#131

Post by njs12345 »

buro9 wrote: post #70
lordlarm wrote: post #44

The next step for Square, in my opinion, is developing a reader for the EMV cards ( http://en.wikipedia.org/wiki/EMV ), which is hugely dominant in Europe - and also more secure. See a this useful Quora post, from 12 months ago: http://www.quora.com/How-does-Square-intend-to-translate-the... Going international, or making such a reader, opens up an enormous market and the potential is huge. I'm waiting, excited, as I…

iZettle would not get a lot of adoption in it's current form. For merchants the biggest issue around chip and pin cards is this: If the merchant takes a signature, then they are liable for loss incurred by bad transactions. Which simply means, very few merchant accept signatures and only in exceptional circumstances. So any EMV reader in Europe, to achieve adoption by merchants, will need to offer a PIN entry method.…

Of course, all of this is absurd security theater, given that chip-and-PIN is already broken: http://www.cl.cam.ac.uk/~sjm217/papers/oakland10chipbroken.p...

Re: Square introduces monthly pricing

#132

Post by njs12345 »

infinite8s wrote: post #103
ImprovedSilence wrote: post #97

Earlier quoted context omitted.

You make good points, I agree with the benefit of cards over cash as well. And who wants to lug around a checkbook when I can just put a small piece of plastic in my wallet? There is definite value in that. Maybe even 3% value. I think CC companies may get the "unpopular incumbent" label because most people are not even aware of how credit cards work, and their costs are often times hidden. I mean hidden in the sense…

Most merchant agreements prohibit offering a discount for cash purchases. Those jewelers who do it are probably betting that they won't get caught and have their CC processing yanked. What this means is that in effect everybody pays slightly higher prices in to cover the fees for accepting credit cards.

This is not quite true. They can offer a discount when paying in cash, but they can't charge an extra fee when a credit card is used after the agreement to purchase.

Source: http://usa.visa.com/personal/using_visa/checkout_fees/index....

Re: Square introduces monthly pricing

#133

Post by Firehed »

jsherry wrote: post #102

If a merchant does at least $13,000 per month in credit card revenue, this is a good deal (read on for assumptions). Quick and dirty math here: Stripe charges $275 per month for card revenues up to $21,000 per month. I took a look at http://truecostofcredit.com (courtesy of FeeFighters) and the merchant fees per transaction vary widely based on the type of merchant as well as card type. For the sake of argument, let'…

If the only thing you're selecting your merchant processor on is a couple of basis points, you're going to end up screwing yourself over regardless. You'll never get the real cost of processing out of a traditional merchant processor regardless - in fact, you really can't unless you know the cards* you'll be charging ahead of time. There's a lot more that also matters, like time to receive funds, reserves, chargeback costs, handling, and dispute resolution, gateway fees, breakdown of authorization versus capture costs... the list goes way on.

* Unless you're doing billions of CC volume per year, in which case that turns into real money.

Not all Visa cards are created equal. Different Visas cost different amounts to process, based on a huge number of factors. Debit/Credit/Charge, Intl/Domestic, Business/Personal, Prepaid, numerous sub-categories, etc.

Re: Square introduces monthly pricing

#134

Post by Firehed »

rodly wrote: post #14

Is it illegal to chop up payments that exceed $400? If not, I'd say this is a nice way to save a bit of money if you do more than $10,000 in business every month. Not sure if it's worth the hassle to implement though.

The pricing only applies to swiped payments, not keyed - so it's not an option.

And if it was possible, it's definitely a TOS violation (though not illegal, unless someone thinks you're laundering money)

Re: Square introduces monthly pricing

#135

Post by sjtgraham »

Firehed wrote: post #130
bgentry wrote: post #26

Earlier quoted context omitted.

There are virtually no fixed costs to actually performing the transactions. The fees are levied by the not-so-competitive Visa/Mastercard/AMEX trio that would love to keep their fees artificially high.

The networks get very little (IIRC a small flat fee per transaction on the order of 5 to 10 cents, but I don't have our pricing in front of me and it's some of the most opaque pricing you'll ever see) - most of interchange goes to the issuing bank. Blame the banks issuing credit cards for the high rates, not Visa and MC (both AmEx and Discover are, effectively, their own issuing banks - so go ahead and give them thei…

Interchange goes to Visa, MasterCard, et al not the issuing bank. This is their vig.

Re: Square introduces monthly pricing

#136

Post by mleonhard »

barmstrong wrote: post #127
gsibble wrote: post #40

Earlier quoted context omitted.

Hi tibbon! To answer 1: Almost all of the fee structure goes to players much higher up the chain than Square. The networks take a chunk, but in fact most of the fee goes to the originating bank (the bank that issued the card). This is a major source of income for most banks these days and can generally be arbitrarily set by them since merchants not only have no other options except cash, but also cannot tell what the…

"figure out how to create an interchange free system" In my view, this is the potential of bitcoin...an open platform for payments that doesn't require trusted third parties. I don't think a single company (or even country) could pull it off, but a new open protocol (like SMTP but for payments) that runs on the internet could do it. I'm making a bet in this space (see profile).

I'm working on an "SMTP for payments" protocol. I'd like to turn it into an RFC someday, after some problems are solved.

Re: Square introduces monthly pricing

#137

Post by abalone »

EvanKelly wrote: post #122
abalone wrote: post #109

Kudos for the "ballsy" simplicity. I don't know if people appreciate how big of a risk this is for Square. Square is placing a big bet on the numbers working out in the long run. If their analysis is just a little bit wrong, they're going to burn through millions of dollars in losses. Why? Because the 1.3% "sweet spot" is almost certainly well below their cost. "Interchange" is the wholesale rate that processors like…

Are these numbers truly non-negotiable? If that's the case, what's the incentive for a company like Costco to have exclusivity with American Express (who normally charges a higher than average fee)? I've always assumed (maybe erroneously) that Costco received a lower processing fee in exchange for the exclusivity which pushes more transactions.

AmEx is negotiable (though usually it's the most expensive.. and Square cannot offer AmEx exclusivity like Costco can). Notice I said Visa & MC are the standardized, non-negotiable rates.

But you're right, they're not totally non-negotiable. Supposedly very huge retailers like Walmart get better rates. But Walmart does probably 20X Square's volume, even with Starbucks folded in.

Re: Square introduces monthly pricing

#138

Post by Firehed »

sjtgraham wrote: post #135
Firehed wrote: post #130

Earlier quoted context omitted.

The networks get very little (IIRC a small flat fee per transaction on the order of 5 to 10 cents, but I don't have our pricing in front of me and it's some of the most opaque pricing you'll ever see) - most of interchange goes to the issuing bank. Blame the banks issuing credit cards for the high rates, not Visa and MC (both AmEx and Discover are, effectively, their own issuing banks - so go ahead and give them thei…

Interchange goes to Visa, MasterCard, et al not the issuing bank. This is their vig.

Sorry, no. Fees are paid to the issuing bank, acquiring bank, and network. The majority of it goes to the issuing bank, and that's the non-negotiable rate when you get a merchant account. That fee is known as the interchange fee. The processing fee is something you negotiate with your gateway and/or acquiring bank.

I work in the industry; it's my job to know how this works. Here is an example from Wikipedia (bear in mind the amounts are fictitious but relatively accurate): http://en.wikipedia.org/wiki/File:Gao-report-on-interchange....

Re: Square introduces monthly pricing

#139

Post by Tortoise »

conductr wrote: post #101

This benefits only those processing $15.5K - $30.0K per month. Otherwise, Intuit's Gopayment at $12.95+1.7% is best. https://docs.google.com/spreadsheet/ccc?key=0An_-Z6kZBAXndFF... Addition: Gopayment is also better than Square's standard 2.75% for anyone processing more than ~$1,200 per month

You're being naive. Read the fine print on Intuit's offer. Their rate only applies to "qualified" transactions. Rewards cards, among others, aren't "qualified."

Re: Square introduces monthly pricing

#140

Post by buro9 »

njs12345 wrote: post #131
buro9 wrote: post #70

Earlier quoted context omitted.

iZettle would not get a lot of adoption in it's current form. For merchants the biggest issue around chip and pin cards is this: If the merchant takes a signature, then they are liable for loss incurred by bad transactions. Which simply means, very few merchant accept signatures and only in exceptional circumstances. So any EMV reader in Europe, to achieve adoption by merchants, will need to offer a PIN entry method.…

Of course, all of this is absurd security theater, given that chip-and-PIN is already broken: http://www.cl.cam.ac.uk/~sjm217/papers/oakland10chipbroken.p...

I'm not disagreeing at all.

But then the security theatre results in a change of liability that merchants are unwilling to accept, then you are in a position where to get adoption you have to prevent that shift in liability.

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