Square has done well in the mobile payments space. They identified a niche market of “micro merchants,” or small businesses typically running up to a few thousand a month, and provided them with an easy-to-use solution for their smaller sales. At first glance, their main solution and pricing appears exceedingly simple to understand. They send you a free mobile card reader right to your door and accepting payments is as easy as plugging it into your phone. However, for many of the merchants currently utilizing Square or considering using Square, there are much better options out there. Square’s hardware may be free, but its quality matches the price. Additionally, it more than makes up that cost with the markups it charges merchants. At 2.75% per swiped transaction, Square is one of the most expensive payment processing solutions out there. To top of it all off, Square’s customer service is almost nonexistent, meaning when you have a problem, you’re on your own. All of these aspects of square indicate that although it might be a simple solution, it might not be the right solution for you or your business.
Many merchants are intrigued by Square because of its model of simplicity. A merchant is able to order a Square Card Reader for free and accept payments within minutes of it arriving on their doorstep. However, you get what you pay for, and that free Square Card Reader is destined to break much more quickly than you bargained for. Furthermore, the mobile reader you receive for free is only capable of swiping cards and, therefore, is not EMV compliant. The EMV Liability Shift took place in late 2015 and states that merchants who do not utilize EMV compliant terminals will be held financially responsible for any fraud that occurs at their business, ultimately making the free Square mobile readers obsolete. Square’s quick setup is also reason for concern. Setup up is quick because Square does not require its merchants to go through a true underwriting process. While this might mean that they can start taking transactions within minutes, it also means that Square can easily hold your funds for an indefinite amount of time if you accept any transactions that deviate even slightly from the norm. Not only can holding funds be annoying, but it can also be detrimental to a small business that is reliant on that incoming capital.
While the (magnetic stripe) Square Card Reader might be free, the cost of processing is anything but. Square charges markups over interchange that are much higher than the industry average. For swiped transactions, merchants pay 2.75% for all card types. For keyed in transactions, they pay 3.50% plus 15 cents per transaction. Even if a customer pays with a debit card that has an interchange rate of 0.05%, they still have to fork over that hefty percentage straight to Square’s pockets. Compared to the average direct cost of all cards, 1.5%, Square charges a markup that is often more than double the rates set by the credit card companies. Keeping in mind that Square was initially designed for the micro-merchant, there are instances when their flat rate might make more sense than a traditional merchant service provider. The breakeven point is around $4,000. If a small business is using Square and running monthly volume exceeding $4k, they should research alternatives that will not only save them money but also provide a more well-rounded user experience. Many merchants become complacent with these exorbitant charges because of two things. One, they don’t understand interchange and that anything above it (about 1.25% in Square’s case) is going straight into the provider’s pocket, and two, they believe that it is simpler to pay a flat rate on every transaction. While it’s true it might be simpler, it’s also costly and unfair to the merchant.
On top of high rates, cheap hardware, and no underwriting process, Square also lacks any true customer support. If a merchant runs into an issue with their processing, they are prompted to leave a note for Square that will be responded to within 24 hours. However, a response within 24 hours rarely means any actual support will be given. Due to Square’s previously mentioned lack of an underwriting process, merchants are much more likely to run into issues such as funds being held than if they were with another payment processor. When a merchant is unable to get on the line with a knowledgeable, dedicated customer service representative, these problems can take days, and commonly weeks, to resolve. For many merchants, even hours of waiting is enough to lose a sale and negatively impact their business.
While many micro merchants can benefit from the simplicity that Square has to offer, any Small-to-Medium-sized business processing over $4,000 a month would be wise to look at other options. Mobile card readers and online processing solutions, similar to what Square offers, are available by countless other providers for more reasonable pricing and greater support. However, they need to be careful that they don’t just switch to another provider that will lock them into a contract charging similar rates as well as ancillary fees. A great alternative for any merchant using Square is a subscription based merchant services provider, such as Fattmerchant. Fattmerchant offers processing solutions for every business type free with membership, as well as 0% markups on interchange and no ancillary fees, all for the same no contract model as Square. By kicking Square to the curb, merchants can process with a merchant services provider they can trust as well as put more money in their pockets at the end of every month.
[Fattmerchant is a subscription-based merchant services provider, offering unlimited credit card processing at direct cost – 0% markups, no ancillary fees, and no contract. We offer free equipment with each plan, online reporting analytics, and personalized customer support. At Fattmerchant, our bottom line is making your bottom line bigger.]
