Mobile Commerce

Square Swimming With Payments Sharks

With the launch this week of Apple Pay and the coming spinoff of of PayPal from eBay, Square faces the prospect that its customers could be lured away by rivals’ lower fees, easier transactions and a deeper pool of buyers and sellers, according to Bloomberg News.

Square reportedly processes about $30 billion in payments annually and has signed up more than a million businesses, most of them small merchants. Like Square, PayPal — which is much bigger than Square with 157 million active buyers and sellers, $215 billion in payments per year and $7.58 billion in revenue — also offers card readers for smartphones and a cash register for stores.

In August, Amazon introduced Amazon Local Register, a free smartphone and tablet application with a card reader that lets merchants accept payments. And for its Apple Pay service, Apple is working with Stripe, which enables payments in mobile applications. “The stakes for Square are now much higher,” said Piper Jaffray analyst Gene Munster.

What’s clear is that the competition will drive down the fees charged to merchants for payments. While Square takes a flat 2.75 percent of every transaction, PayPal charges different rates depending on whether payments involve credit cards, and Apple Pay aims to reduce processing charges by offering improved security.

Square is moving up the retail pecking order by processing payments for Starbucks, and Whole Foods and Uniqlo have started to use Square in stores. And to boost its mobile-shopper appeal, Square is rolling out Square Order, which lets people pay without having to pull out their phones by detecting when a user is approaching a coffee shop and automatically ordering and paying for a drink in the background.

“Square really innovated the business model for the micro-merchant, but it doesn’t have consumers,” Karen Webster, CEO of Market Platform Dynamics in Boston, told Bloomberg. “You’ve got to get consumers to want a Square account, but how do you do that if there’s nowhere to use it?”


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