Square’s “Simple Revolution”: No More Per-Transaction Fees
Mobile payment startup Square, named after the tiny white device that turns any iPhone into a credit card processing payment system, announced this morning that it would be leaving other payment systems behind by dropping the standard 15 cent processing fee.
Calling the move a “simple revolution,” Square CEO Jack Dorsey tweeted that Square would be removing the per-transaction fee and simply charging an overall 2.75% rate on all transactions.
The announcement on Square plays up the idea that those per-transaction fees complicate the situation for merchants, creating a “complex maze of hidden costs and fees.”
“You know all those ‘under $10 cash only’ signs you see?” tweeted Dorsey, “That’s because of the 15 to 30 cents merchants pay.”
Traditional systems not only charge a 15 to 30 cent charge per transaction, but also take a percentage on top of that, causing merchants to either refuse credit card transactions below a certain threshold, go cash only, or tack on extra costs for using a credit card.
As Dorsey (who is on a bit of a Twitter rampage on the topic) notes, “Merchants don’t know how much they pay to accept credit cards (a lot). That cost is passed on to you, the payer.”
While Square may have run into a couple of speed bumps in 2010, from credit card dongles that didn’t work with the iPhone 4 to a lawsuit over the origins of that self-same dongle, the company has gained momentum in 2011. Last month, Square closed a $27.5 million round and this move could certainly give them an extra push among small businesses. Already, Dorsey is retweeting merchants who say they plan on switching to the mobile payment system as a result of this announcement.
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