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3 Reasons It’s Not Hip to Be Square: True Merchant Payment Solution?


Square is a relatively new payment platform whose unique selling proposition is giving away a square plastic magnetic stripe reader that plugs into the headphone port of an iPhone or iPad depending on which service you utilize. Square is growing in the micro-merchant world and it’s popular with end users because it’s easy to use.  Square is great for some very small merchants but this small package has some significant disadvantages.  In fact, many experts agree that unless you have a miniscule number of transactions you’ll be paying much higher transaction fees and give up quite a bit just so you can process transactions on your iPhone.

Here are the 3 key reasons why Square may not be the optimal solution for your businesses payment processing:

1.    Square Takes a Big Bite Out of Your Pie

The industry standard of credit card transaction fees is approximately 1.75% fee per transaction. Whereas Square charges a 2.75% fee per transaction, which seems small for a $4 girl scout cookie sale, but let’s crunch the numbers: if you process over 10,000 $10 purchases in one year (less than 1000 per month)—Square gets a whopping $2,750 of your revenue as opposed to 1.75% or $1,750 with an actual merchant account through a payment processor or payment gateway.

2.   Debit? eChecks? Nope, Back to Square One

Many customers use their debit cards and some cards don’t have the dual ability to run as a credit card. Where Square does not have PIN pad function, your typical Point of Sale (POS) and the Paymentsite virtual terminal do. So if you want to accept less costly PIN-based debit cards—or electronically process checks from your customers, you’re back to square one.

3.   More than 10 Cashiers or Users?

Square’s account limits you to having 10 users. For a retail store, catalog call center or fundraising organizations with well over 10 users, this poses a problem. Square’s offerings are limited compared to true merchant accounts via payment gateway and processing products such as Paymentsite that don’t have user maximums.

Paymentsite Mobile offers payment processing on the iPhone at lower cost for high volume business

Although Square is a great solution for ultra-low volume businesses, most other businesses would enjoy a larger profit margin and much more functionality by shopping around for more versatile payment processing solutions such as Paymentsite, before resorting to Square’s iPhone solution. True merchant accounts can provide merchants with more flexibility, usability, and more profitability.

Set on using an iPhone for payment processing?

Business owners who want mobile payment processing on their iPhone but don’t want to be stuck in a Square box might find Paymentsite Mobile “fits the bill.”



 Paymentsite Mobile

Use iPhone for payment processing

Yes, included

 Yes, included

# of users



Credit cards

 Yes, included  
Yes, included


 Not included

 Yes, included

PIN Debit

 Not included

Yes, included*

Processing fees



Full-featured Virtual POS terminal that runs on Mac OS X and Windows

 Not included

 Yes, included

Integrated payment transaction reports for both iPhone and other payments

 Not included

 Yes, included

Customers can self-pay online or from their mobile phone without giving you their payment info


Not included



 Yes, included

With Link2Payments customer payment portal 

*PIN debit is available through the Paymentsite Virtual terminal

**Fee associated with average retail/swiped merchants. Merchant processing fees naturally vary by type of transaction and type of merchant.



I'm afraid the term "naturally vary" is extremely misleading. The whole point of Square is to take that natural variation out of the equation so that merchants know -- in advance -- rather than after the fact re: "natural variation" what they will be charged. The 2.75% charges by Square is much lower, on average" than a "naturally varying" hypothetical when transaction amounts are small. Which is, in fact, the market segment Square addresses. Hopefully, future comparisons will be apples to apples rather than gratuitous.
Posted @ Wednesday, July 27, 2011 9:57 AM by Greg Kidd
Hi Greg, Thanks for sharing your thoughts.  
Just to answer your concerns, while there may be some benefits for the merchants who only process very small volumes, most merchants would do better to work with a merchant processor that unbundles the processing rate. These merchants are more likely to not only enjoy a lower net effective rate, but with unbundled pricing, they will also be in a better position to compare competitive merchant processor fees, apples to apples.  
We agree that Square offers a good service to the market segment they address, but many merchants are not fully aware of the other services out there. This post is reflecting some of Square's disadvantages compared to a different merchant processor that has mobile capabilities as well.
Posted @ Friday, July 29, 2011 12:39 PM by Jackie Truong
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