Square introduces monthly pricing • Hacker News Board

Re: Square introduces monthly pricing

#91

Post by lionhearted » Thu, Aug 16, 2012, 8:38 PM UTC

tibbon wrote: post #65

Unoeufisenough wrote: post #53

Earlier quoted context omitted.

Actually most (depending on the card, the great majority) of those fees end up going right back to the cardholder. Those fees are what pays for all those airline points, cash-back discounts, guarantees and liability protections, purchase insurance etc. Another way of thinking about credit cards is a way that a large groups of customers are able to band together to collectively demand discounts, rewards and other valu…

Very interesting! Perhaps I'm a minority here, but I actually would more prefer just simple cards that are used for payment than a reward-based card (which is why i have a very basic debit card from a credit union). All the airline points and discounts just strike me as marketing more than a real benefit. US Airlines keeps reminding me of the number of points I've forfeited by not using them enough... as if that will…

If you're in a business with small-ish margins and your suppliers don't charge you extra for taking credit card, a cashback or other rewards card can actually measurably move the bottom line.

Re: Square introduces monthly pricing

#92

Post by kennywinker » Thu, Aug 16, 2012, 8:39 PM UTC

jessepollak wrote: post #9

stevencorona wrote: post #2

There are limits (it's still _revolutionary_ for an industry that loves to nickle & dime, though) Up to $400 per any single transaction and up to $250,000 in total transactions per year—or approximately $21,000 per month. Swiped transactions over these limits simply cost 2.75% per swipe. $21,000 * .0275 = $577.5 in fees. I would love to see more Square adoption. In Charleston, lots of cart vendors (hot dogs, popsicle…

Essentially, a 1.32% transaction fee for all revenue under $250,000, 2.75% on all revenue over. Deal gets worse for the business the further your revenues are from the $250K limit. Definitely a big deal though.

It's definitely targeted at getting more businesses that do $120,000 - $300,000 on credit cards annually.

I'm guessing they were having issues with adoption in that sector so they rolled this out to make it a little tastier.

They probably have the best penetration in the under $120k/year sector, because of the ease of setup, low overhead, no monthly fees, etc.

I have a good friend who runs a small shop (> $50k/year) and she loves square. Got them up and running painlessly, their iPad is their cash register / POS system, and she pays a manageable amount to Square for it. She keeps asking me when Square is going to start doing online payments, because their transactions tend to be small online PayPal's 2.9% + 30¢ is painful in comparison.

Re: Square introduces monthly pricing

#93

Post by biot » Thu, Aug 16, 2012, 8:43 PM UTC

eridius wrote: post #57

biot wrote: post #34

Through the use of elementary arithmetic, Square is charging every company the average expected transaction fees for the month, regardless of whether the actual transaction fees would be higher or lower than this. So half the companies save money while the other half lose money. This is being spun as an innovation when, in reality, it's likely to net Square more revenue as there are probably more merchants between $0…

No they're not. They're only charging companies that sign up for this fee structure. Anyone who signs up for this when they're not making $10k is bad at math.

Most people who sign up for a fixed monthly fee gym membership are bad at math rather than paying a smaller drop-in fee. It makes for good revenue for the gym though. And for those who workout a lot, it is a good deal.

Re: Square introduces monthly pricing

#94

Post by kennywinker » Thu, Aug 16, 2012, 8:46 PM UTC

nnnnnnnn wrote: post #59

biot wrote: post #34

Through the use of elementary arithmetic, Square is charging every company the average expected transaction fees for the month, regardless of whether the actual transaction fees would be higher or lower than this. So half the companies save money while the other half lose money. This is being spun as an innovation when, in reality, it's likely to net Square more revenue as there are probably more merchants between $0…

There's no upper bound. Businesses making $30k per month still save money with the monthly pricing. It's a good deal for any business swiping over $10k/month on average.

Not sure what traditional payment terminals charge, but presumably when you start doing large volume they bring the cost down. There is going to be a point where square's flat 2.75 between 0-10k/month and 21k/month-infinity is more expensive than a bank terminal (which I'm sure fall to >1.5% at high enough volume).

Re: Square introduces monthly pricing

#95

Post by LyndsySimon » Thu, Aug 16, 2012, 8:47 PM UTC

gsibble wrote: post #72

dangrossman wrote: post #54

Earlier quoted context omitted.

I'd be surprised to hear they're operating at a loss in terms of the fees alone. Most of us are used to seeing fees quoted by PayPal, Stripe, Amazon and other processors for internet transactions. Card-not-present interchange fees are higher than card-present fees because of the higher risk. Square should be getting much better rates from their processors since they're handling in-person transactions.

That's just the news I was hearing from people who have seen their financials. Let's say they aren't operating at a loss though. The processor typically receives 25-50 basis points on a transaction (0.25-0.5%). Let's assume Square is receiving 0.5% and generating revenue from their transactions. At $5B/year in processing volume, that means that Square's revenue is 0.005 * $5B = $25,000,000. $25,000,000 in revenue for…

I have no insight into Square's management or financials, but if I were Jack Dorsey, I would find it reasonable to operate at a moderate loss for a fair amount of time, before launching my own exchange system that bypasses cards completely.

Indeed, that seems to be the way they're going, what with _Pay with Square_ allowing for contactless, mobile-based payments.

First they disrupt card processing for small merchants with low transaction rates that just murder traditional merchant account fees. Next, they get themselves involved on the consumer side of the transaction, abstracting away the physical card. What's next? Why not do away with the card entirely?

How about _Pay with Square_ prepaid accounts? Allow users to fund their accounts via store-bought gift cards, or Dwolla, or perhaps even go crazy and accept Bitcoin. If they do that, then Square could give that 2.5% transaction fee back to the consumer, and profit from the interest on the float.

Re: Square introduces monthly pricing

#96

Post by ridersstorm » Thu, Aug 16, 2012, 8:52 PM UTC

dangrossman wrote: post #78

philip1209 wrote: post #74

Earlier quoted context omitted.

You can hide it with LLCs. I had a roommate sophomore year of college get investigated by the FBI for running a similar scheme.

You might get away with it longer doing that, but the repercussions should you be caught wouldn't be lessened any by using an LLC. The real risk you're taking when abusing a merchant account is being added to the TMF (Terminated Merchant File) and MATCH (Member Alert to Control High-Risk Merchants) lists. These are essentially blacklists for the payment card industry that all acquiring banks and processors check new…

there was a planet money podcast not too long ago that went into how incredibly easy it is to create a foreign corporation with absolutely no documentation whatsoever, and that it is actually easier in certain parts of the united states. i'm not going to give you a link, if you want it, find it yourself you lazy piece of shit.

Re: Square introduces monthly pricing

#97

Post by ImprovedSilence » Thu, Aug 16, 2012, 8:57 PM UTC

majormajor wrote: post #88

ImprovedSilence wrote: post #82

Earlier quoted context omitted.

Not to be the debbie downer, as I use rewards cards as well. But there is not such thing as free money. This money you are getting is coming from somewhere. The banks are clearly raking in a$$ loads of cash from the merchant when you use your card. I think it's safe to assume the merchant increases the cost of their goods to offset the fees he pays for transactions. So, the merchant sets his prices 3% higher than he…

This is a very good point, I wasn't entirely clear there. I meant free in the context of someone who's already using a debit (I assume processed-as-credit at most merchants) card, yet missing out on many of the benefits offered by many credit cards. I disagree about the tragedy of the commons part -- specifically that it's any tragedy. In order to keep the discussion simple I'm not going to go into the potential for…

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 that we don't realize the price increase of goods this convince is costing us. I bet if the apple store started selling mac pros at 3% under retail price for cash, more people would inconvenience themselves to pay in cash. But many people are not properly informed, and therefore do not act as rational players. Many jewelers seem to play in this realm of cutting prices for cash buyers. (I know, there may be other reasons for that, but it's an example of merchants incentiveizing buyers to use cash)

Re: Square introduces monthly pricing

#98

Post by panabee » Thu, Aug 16, 2012, 9:01 PM UTC

gsibble wrote: post #72

dangrossman wrote: post #54

Earlier quoted context omitted.

I'd be surprised to hear they're operating at a loss in terms of the fees alone. Most of us are used to seeing fees quoted by PayPal, Stripe, Amazon and other processors for internet transactions. Card-not-present interchange fees are higher than card-present fees because of the higher risk. Square should be getting much better rates from their processors since they're handling in-person transactions.

That's just the news I was hearing from people who have seen their financials. Let's say they aren't operating at a loss though. The processor typically receives 25-50 basis points on a transaction (0.25-0.5%). Let's assume Square is receiving 0.5% and generating revenue from their transactions. At $5B/year in processing volume, that means that Square's revenue is 0.005 * $5B = $25,000,000. $25,000,000 in revenue for…

Excellent analysis. Agreed that valuing Square as a credit card processor makes for a very frothy, perhaps unjustifiable, valuation.

My belief, however, is that some investors are betting on Square's potential as much more than a credit card processor -- really, more of a data and payments platform. If Square can own the marketshare of payment transactions happening offline, then other monetization opportunities appear and the credit card processing is more of a loss leader or infrastructure investment (e.g., Amazon investing in warehouses and supply chain management).

Some of the other opportunities include: coupons (they know exactly what you buy and can tailor deals); analytics (e.g., household good purchases dropped by 25% in San Francisco last month); recommendation engine (I ate at these restaurants last month, this week Square recommends these); and a replacement network for credit cards, though this seems unlikely in the near term because of the difficulty factor and the fact some big banks are investors in Square.

While there are assuredly other ideas, and while some of these may never yield profits, the macro point is that investors are betting that Square can monetize payments data and payment identity in new ways -- if it can become the new funnel through which everyone pays businesses in the offline world.

Re: Square introduces monthly pricing

#99

Post by batgaijin » Thu, Aug 16, 2012, 9:07 PM UTC

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…

I'd bet more on NFC being the next big thing. Who wants fancier cards?

Re: Square introduces monthly pricing

#100

Post by zootm » Thu, Aug 16, 2012, 9:12 PM UTC

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.…

Would it be possible for them to just rely on the commodity chip and PIN readers that most banks (in Europe, or at least the UK where I am) use for 2 factor auth for online banking?