Competing With Square on Price

Most of you have this mindset about Square pricing, “I can’t compete with Square.  They have the flat rate, making it really simple.”  And most merchants have the mindset that they have flat rate pricing of 2.75% with Square, so why should they look at their statement?  In this episode I’ll give some GOOD NEWS if you’re trying to compete with Square on pricing.  There is some inside information you should know.  In my opinion, Square is fumbling the ball in their pricing by making it more complicated.  Let me show you the areas where you can compete.

As I mentioned in my 2018 predictions, I believe Square is becoming a more serious threat in our industry.  They are making needed changes in their pricing, but these are resulting in complications.  This gives the rest of us an edge on competing with them.

The flat rate of 2.75% does apply to all the major credit cards on a traditional Square swiper.  However, if cards are tapped, inserted, or swiped with a Square register, the rate is now 2.5% plus 10 cents.  The Square register is a special point of sale system that Square has created.  One way they are making additional money is by dropping those 25 basis points and adding $0.10.  That $0.10 will make a massive difference for many places using the Square register, especially those with a small ticket size.  Square is not as simple as they used to be. 

The next notable change is on keyed-in card transaction.  Their rate is 3.5% and $0.15.  That is REALLY a lot for a keyed transaction.  Keep in mind, a lot of keyed transactions today are still regulated.  The regulation is $0.22 and five basis points, but Square is charging 3.5% and $0.15.  Merchants who are keying in a lot of transactions are getting big charges.

One more very important change is called instant deposit.  This is a newer technology which I predict will become mainstream probably by early 2019.  Instant deposit means a bank can transfer money to another bank card for certain banks instantly.  So, instead of next day funding, there is same day funding.  Square jumped in and wisely took advantage of this technology early.  For processors or anyone with your own backend, you should jump on this immediately.  I promise it’s going to be a major competitive advantage – or disadvantage if you wait too long!  This will be used for everything from merchant cash advances, funding on merchant accounts, split funding, and many other scenarios.  There is a small extra cost to do instant deposit.  For somebody like Square who is doing millions, or perhaps tens of millions, of dollars a day, the cost is minimal.  However, Square charges an extra 1% – ONE HUNDRED basis points!  Can you imagine that?

Some of my readers who have your own backend or are an executive at a processor should be saying, “Hey, you know Square has it for 100 basis points.  They’ll transfer your money same day.  We do it for 25 basis points.”  Think how much money that would be if you were making 25 basis points on all your volume.  You could have a Schedule A cost in there because there are some costs.  Keep this in mind, though, when you are competing with Square – they charge an extra 1% on that instant deposit.

Now, here are some things you should do to compete with Square based on this information I’m sharing.

#1.  Cast doubt.   Square is impenetrable in the minds of merchants.  The merchants’ mindset is, “I’m with Square.  I pay 2.75%.  Why would I need to look at my bill?  Why would I need to look at my merchant statement?”  I estimate as many as 20% or 30% of merchants who are with a physical location in the field are paying more than 2.75%.  Many pizza shops who are doing 20% of their business as key entered are paying 3.5% and $0.15.  Also, many merchants using Square register are paying 2.5% and $0.10 AND 3.5% and $0.15 on the keyed transactions.  Do you realize Square is pushing merchants toward the instant deposit, so they can make their 100 basis points?  Merchants may have either accidentally or on purpose signed up for the instant deposit. 

Start casting some doubts by saying to merchants, “Look, here is the deal.  If Square is really charging you 2.75% flat and nothing else, I’m wrong.  That’s fine.  I would ask you to at least take a look at your statement. Let me come back tomorrow and check the statement with you.  Some merchants ARE on the 2.75%.  But you’ve got a Square register, are doing some keyed transactions, and mentioned getting those deposits right away.  Therefore, you could be paying 3, 4, or 5% for your transactions.”  Casting some doubt on Square will help you compete against them.

#2.  Be familiar with Square pricing.   Be prepared to talk about it when you are in the field with merchants who currently have Square.

#3.  Understand specific verticals.  Attack Square when going after specific verticals.  Please don’t miss the next episode when I will discuss this important topic.

There is a useful website to keep in mind when competing with Square on price.  You may have heard of it before:  instantquotetool.com.  On February 5, 2018, we are going to be rolling out our new version of the instant quote tool in beta.  There are some specific things in the tool to help you understand Square pricing.  One helpful function will be the ability to change some numbers in the tool and show merchants exact figures.  For instance, if a merchant does 20% key entered, you can change that number in the tool with interchange.  By showing the merchant exact figures, you can compete against Square.  I am working to develop a “compete with Square” calculator, also.  Hopefully that will be ready for use close to March 1^st.

By using the instant quote tool, you can have helpful figures even without the merchants’ statement.  Ask merchants how much they paid last month for Square processing.  Suppose the answer is $380 for $10,000 in volume.  You can say, “Well, you paid 3.8%.  Here is what I can do for you.”

 Our new system has some very cool stuff.  One item I know you’ll love is a marketing app you can use on your phone.  Make sure you stay tuned.  Go to instantquotetool.com now and sign up for the 30-day free trial.  Become familiar with the process.  Then be ready to take advantage of our great new system on February 5^th!

Read the previous article here:  http://www.ccsalespro.com/leasing-isnt-evil-changed-mind/  Leasing isn’t Evil.  Why I Changed My Mind.

Read the next article here:  http://www.ccsalespro.com/steal-client-from-square/  How to Steal a Client from Square