Square And Apple: Who Is The Big Winner Of Their Payments Pair-Up?

History has a tendency of repeating itself in payments — though luckily, things in this space move fast and attention spans are often fairly short, so mostly we don’t notice.

Take Apple and Square, for example.

It was almost exactly three years ago that the two firms were written about — together — a lot. Not hard to understand that — Square pretty much set off the great mPos wave with its easy plug-in dongle that turned any iPhone or iPad into a credit card reading machine.

But in January-February 2014, the talk wasn’t really so much about their phone/card processing combo package, as much as it was acquisition. Everyone’s favorite rumor at the time was that a few of the big guys — aka Apple and Google — were both circling Square and considering it for a big ticket acquisition. At the time, Square CEO Jack Dorsey even noted that it would be his preference to be acquired by Apple since the two firms had similar aesthetic sensibilities.

Wishful thinking perhaps, but the deal never materialized — the reason for why varies depending on whom one asks. The official answer from all three firms was that no acquisition was ever really, seriously under discussion. The unofficial account is that the acquiree wanted more money than the acquirers wanted to spend.

As 2014 became 2015 and 2015 became 2016, Square and Apple were, once again, the SMB payments “it” combo package. Square’s POS system was included a very elegant NFC/EMV chip reader — Apple Pay accepted as part of that package.

And, now in 2017, Apple and Square will be upping the ante on their collaboration. Square is encouraging their merchants to accept Apple Pay — and maybe to even get consumers to want to use it.

By encouraging, we mean paying.

Good-Bye Swipe Fee

According to Square, Square merchants with readers capable of taking Apple Pay will be able to process $12,000 in Apple Pay payments a year — and pay absolutely no swipe fee for their troubles. The deal, according to a press release from Square, is probably worth about $350 to merchants annually.

To put that in a bit of context, $12,000 in sales is like the little jam lady at the local farmers market selling 25 jars of her homemade jam at $10 a jar every weekend of the year. It’s a very small merchant.

Square merchants are also able to get a free Apple Pay marketing kit with promotional material (stickers, signage, etc) to encourage customers to use their iPhones or Apple Watches. The kit also comes with training materials, so business owners and their staff who are unfamiliar can educate themselves and their employees about using and accepting Apple Pay — and how to walk customers through using it as well.

The credit on processing Apple Pay transactions goes into effect once the seller has set up its countertop display for verification.

What Apple Gets

Apple gets more bites at the, well, apple, when it comes to customers using their payments platform at small – very small – merchants.

And for the little jam lady at the local farmer’s market — and other small sellers like her — being able to process payments for free is a great deal.

Plus, there is some evidence to suggest that education via a merchant can have very dramatic effects on use. A concerted effort in Portland to educate and provide sellers a way to teach consumers about the benefits of paying with Apple Pay saw the percentage of transactions reportedly triple over the course of the campaign.

And, the merchants liked it.

“We’ve loved using the new Square reader at all four of our locations,” said Julie Bond, owner of Saint Cupcake & Poplandia Popcorn in Portland. “The entire experience of paying with your iPhone is more fast and fun for our customers and for us.”

Those happy merchants lead us to …

What Square Gets

According to Square Hardware Lead Jesse Dorogusker, the simplest answer is that it gets to offer a better service for its merchants and their customers.

“It’s no secret that chip cards can be slow, which is why we built our reader to also accept contactless payments, a faster and safer way to pay,” he noted. Anything we can do to make a seller’s experience faster and safer, including working with Apple to encourage Apple Pay usage, is an investment worth making.”

Square also sees some benefit in its hardware business – a market that is increasingly competitive now with many other players in the space. Free processing is a good hook to lure small merchants in, who both Square and Apple hope become large merchants over time.

More small merchants gives Square more opportunities to wrap other revenue opportunities around it — like working capital or business management tools.

Will any of this be enough to move the ball massively — either for Square or Apple Pay? It’s a really nice gesture and a great helping hand for the local merchants for whom every dollar counts. But moving the needle will take lots and lots of them, switching lots and lots of consumers to Apple Pay — and staying in business long enough to get bigger. As Square knows better than most, it takes onboarding a lot of small merchants with low volumes to make a big business.


Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 Mobile Order-Ahead Tracker, serves as a monthly framework for the space. It provides coverage of the most recent news and trends as well as a provider directory that highlights key players across the mobile order-ahead ecosystem.


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