February 23, 2011
February has been a hot month for mobile payments with two big time players engaged in a price war that has both payments geeks and business owners on the edge of their seats. In January, Square’s biggest rival, Intuit, announced a free version of their Square killer GoPayment. The catch was that businesses had until mid-February to sign up. In a surprising move last week, Intuit decided to extend the free version indefinitely.
Yesterday, Square countered by eliminating the per transaction fee associated with using their service. Now users pay a flat 2.75% for all swiped credit card transactions. Some have begun questioning whether Square’s pricing is sustainable or more of an attempt to adopt new users rapidly.
Both Square and GoPayment give users the ability to process credit cards from their smart phones using an attachable dongle. Square currently works with iOS and Android while GoPayment works with iOS, Blackberry, and Android.
One big advantage Square has is the simplicity of its new pricing. The flat 2.75% cost with no monthly fee stands in contrast with GoPayment’s more complicated options. With low volume (under $1,000) the pricing is 2.7% for card swiped, 3.7% for both key entered and non-qualified transactions (like commercial cards) and $0.15 per transaction. With a higher volume Intuit offers a plan with a $12.95 monthly fee and discounted rates: 1.7% for card swiped, 2.7% for key entered, and 3.7% for non-qualified transactions in addition to a $0.30 per transaction fee.
Let’s take a look at how much a coffeeshop might pay in credit card processing fees with both options:
- Using Square – a swiped $3.50 coffee transaction would cost $0.10 cents to process.
- Using GoPayment’s high frequency plan – the same $3.50 coffee transaction would cost $0.36 if a standard card is swiped (excluding the monthly fee).
As you can see, a big difference. The one thing that is clear is that this price war has one winner: business owners who have been struggling with complicated credit card processing rules and inflated costs. Both companies offer a great product with different personalities: Square is the cool new kid on the block while Intuit is the payments giant getting innovative to keep up.
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