The concept of Square is simple: stick a card-reader dongle into the audio input jack of your iPhone or iPod Touch and start swiping credit cards. For small businesses, particularly retailers that aren't always in a fixed location with access to a phone line for a card processing terminal, Square could be a godsend. Some industry watchers have gone so far as to predict that Square portends the end of cash.
Whether Square is a helpful transaction tool, harbinger of an economic sea change, or an overhyped flash in the pan remains to be seen - the service launches in April. For small business owners, the question is whether or not Square is a solution you should consider for your business when it becomes available next month. While you wait for the arrival of Twitter co-founder Tom Dorsey and glass artist Jim McKelvey's brainchild, here are some factors to consider about Square.
Merchant Account Fees
On average, credit card processing companies charge transaction fees of 1.5-2% -- Square charges 3-3.5%. That higher percentage may be deal-breaker for some businesses, but it really depends on the volume of credit card transactions. If your business only processes credit cards occasionally, other merchant providers' fees may be just as high. For low-volume users, the convenience of the Square appliance may well trump the cost, but higher volume businesses will want to look for other solutions and even negotiate for lower merchant fees.
Credit Card Terminal
If you already own an iPhone of iPod touch, you'll need a card swiping dongle and an app to start using Square. The app is predicted to cost $1.99 at the iTunes store and Square says they'll provide the card swiper dongle free. Support for BlackBerry and Android phones is allegedly on the way as well. By contrast, hardware for traditional credit card terminals can range from $150-700 for the most basic terminal up to $1000 for wireless terminals. Leasing the equipment can take lessen the sting some with costs running around $20 a month. Moreover, most merchant card processors require a contract commitment, whereas Square is purely pay as you go - hence the higher per transaction fees.
When it comes to fees and card terminals, evaluating Square is purely a mathematical exercise, but the comparison shifts when it comes to feature set. The expected features for Square includes a number of options that traditional merchant accounts just don't offer, including text and email receipts and photo ID capabilities.
Other Mobile Options
Though Square is a media darling of this moment, it's not the only mobile credit card processing option. Another alternative due out in April is Mophie Marketplace, an magnetic card reader that's built into a case for the iPhone 3G and 3GS. Pricing hasn't been announced yet, but is reported to be compatible with most merchant accounts and will allow syncing of account information, as well as charging the iPhone, via micro USB port.
Another option that combines an iPhone case with a card reader is the PAYware Mobile secure credit card encryption sleeve from VeriFone. Unlike the other two discussed here, PAYware Mobile is available right now; it launched in February. To start swiping credit cards you'll need the free iPhone app from the iTunes store and the PAYware card encryption sleeve, which includes a stylus for signature capture and is free with a two-year contract. Only available for the iPhone now, Verifone claims to be working on versions for BlackBerry, Windows Mobile, and Android.
Regardless of the solution you select for your business, it pays to review the host of available and soon-to-be available options to selection the solution that best suits your needs.
Shannon Suetos is a writer based in San Diego, CA. She writes extensively for Resource Nation, an online resource that provides expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs.
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