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Now Main Street businesses can scrap card swiping fees for one monthly payment of $275
One week after announcing its groundbreaking new partnership with Starbucks, Square is shaking up the mobile commerce world again with another announcement that will have small businesses tap-dancing with joy. Square announced Thursday that it is leveling the playing field between large and small businesses by introducing a new flat, monthly fee option of $275 a month for businesses processing less than $250,000 a year.
That means that instead of paying 2.75% of each sale in processing fees, small businesses can opt to pay a flat rate. Over the course of 12 months, that adds up to $3,300, so for a business processing $250,000 a year in credit card payments, that translates to a processing fee of 1.3%--less than half the 2.75% processing fee Square was previously charging all of its users.
“For 62 years, merchants have suffered complicated, expensive processing fees. Square is the first company to rethink electronic payment pricing with the merchant in mind. We are giving merchants affordable, predictable pricing,” said Square CEO and co-founder Jack Dorsey, in a statement. “With one monthly price, merchants know that the sales they’ve processed in a day is the same amount deposited in the bank.”
Some 42% of small businesses in the U.S. make less than $250,000 a year, with slightly less than a third making less than $100,000 a year. For those businesses processing $100k or less a year, a flat rate of $275 a month probably won’t pay off, since that would equate to a processing fee of more than 3% per transaction. It would be interesting to find out how many of Square’s users process $250,000 a year or less.
Square did not immediately respond to inquiries from Vator.
With some two million people now accepting credit card payments through Square, the company says it’s now processing $6 billion in payments each year. That processing volume is going to explode this fall when Square begins processing credit card payments for all of Starbucks’ 7,000 U.S. locations.
Square’s announcement follows yesterday’s news that Walmart, Target, 7-Eleven, and Sunoco, among others, are teaming up to create a mobile payment network of their own—the Merchant Customer Exchange.
Gartner predicts that by 2016, mobile payments will reach $617 billion worldwide, up from $105 billion last year. By that point, Gartner forecasts that smartphones will account for two-thirds of all phones. Mobile payments this year are expected to reach $171.5 billion—a 60% increase over last year.
Credit card processing fees generate some $40 billion a year for major banks like JPMorgan Chase and Bank of America.
Image source: thethirddriver.com
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