Small businesses often rely on financial services to help them manage their day-to-day operations. These services can be essential for small businesses, but they can also be very expensive. One way that small businesses can reduce their costs is by tiered pricing. Under this type of pricing, businesses are charged different fees based on their usage. For example, a small business that uses a financial service once a month may be charged a lower fee than a business that uses the same service multiple times per week.
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Data for today’s episode is provided by Mercator Advisory Group’s report — Square and Clover Delivering Merchant Services Beyond Payment Acceptance
23% of small businesses have a tiered pricing transaction fee schedule, but they’d prefer:
- While 23% have tiered pricing by volume – only 13% of small businesses prefer it
- The most popular pricing method is flat pricing (eg. 2.75%), used by 37% of market and preferred by 38%
- 15% of small businesses would prefer ‘all in’ pricing – but only 10% of small businesses use that method
- Interestingly, 9% of small business owners don’t know their pricing method, and 11% aren’t sure what they’d prefer
- Two popular small business POS providers, Clover & Square, have fees ranging from 2.3% to 3.5%
- Clover & Square will also include a flat $0.10 – $0.30 per transaction
About the report
Small businesses suffer from a lack of expertise, financial services, and capital, leading to a failure rate of close to 50% within five years of start-up, according to the U.S. Small Business Administration. However, the market has been difficult for merchant acquirers to serve, due to price sensitivity, high risk, and a high cost of sales. A new research report from Mercator Advisory Group, Square and Clover Delivering Merchant Services Beyond Payment Acceptance examines the success of Square and Clover as examples of a new approach to serving small businesses using marketplaces that provide choice and flexibility while using commodity hardware.
“Instant onboarding is the sizzle, not the steak. While digitized and fast merchant onboarding looks great, small businesses need to understand the fee schedule and the complete range of solutions and apps that directly apply to their specific operational needs and future growth,” commented Raymond Pucci, Director, Merchant Services, at Mercator Advisory Group, and author of this report.
This report is 16 pages long and has 5 exhibits.
Companies mentioned in this report: Android, Apple, Apptizer, Bank of America Merchant Services, Celtic Bank of Utah, Clover, DoorDash, First Data, Fiserv, Intuit, PayPal, Poynt, Sam’s Club, Square, and Walmart.