IZettle Aims At Competition With Reduced Transaction Fees

All was quiet on the European mobile POS front yesterday – until Swedish-based iZettle threw a curveball and slashed transaction fees in half.

Mobile card reader company iZettle has launched a new feature, Smart Rate, that cuts transaction fees by 45 percent for merchants who qualify, reported The Next Web. Europe’s mobile card processer market is well established, with several contenders including Rocket Internet-backed Payleven, SumUp, iZettle and more. Up until this point, these three competitors operated on equal playing fields, charging 2.75 percent for each transaction with zero monthly fees. Low transaction represented an effort to appeal to startups and small businesses owners by providing affordable platforms to accept card payments. IZettle is drawing a clear line, and separating its services from competitors by dropping rates to 1.5 percent. What does this mean for other mPOS firms?

At present, only merchants in the UK are able to use the service. IZettle also made it clear that it will keep the 2.75 percent per transaction fee as a cap. Smart Rate will only be offered to small businesses that exceed £2,000 per month in card transactions. IZettle claimed it would manage the reduction calculations at the end of each month, and continue to charge 2.75 percent during the month to keep the process simple and transparent. Businesses that meet the £2,000 benchmark will receive cashback compensation, based on the 1.5 percent and dependent on the amount processed.

Jacob de Geer, co-founded and CEO at iZettle, said to The Next Web, “The UK is our testbed for this new pricing model. If it is successful we’ll certainly be rolling out a similar initiative in other markets in due course.”

Europe’s mobile POS market has little elbow room, and with so many competitors sharing common fees and services, it is difficult to find new ways to maintain differentiation. In competitive markets such as this, often firms will take on competitive-based pricing strategies, which is necessary when there is little difference between rival products. IZettle’s decision to slash prices confirms it is using the pricing strategy in addition to increasing small merchants’ motivation by offering cashback rewards. Competitors will need to charge back with alternative solutions or risk falling behind.

To read the full story at The Next Web click here.