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How to Compete with Square – Part 2
In the last episode, I began a discussion about how to compete against Square by focusing on their weaknesses There are two specific...
What the Square Price Increase Means for ISOs and Agents
Two misconceptions about Square are paralyzing our industry! Get rid of the wrong viewpoint and seize the opportunity to compete with Square on a level playing field. I just completed two episodes about competing with Square. I finished creating those episodes just before the Square price increase! Today I want to answer three […]
James Shepherd
Oct 10, 2019
Two misconceptions about Square are paralyzing our industry! Get rid of the wrong viewpoint and seize the opportunity to compete with Square on a level playing field.
I just completed two episodes about competing with Square. I finished creating those episodes just before the Square price increase!
Today I want to answer three questions and expose two misconceptions which are paralyzing our industry professionals.
Square began with a 2.75% flat-rate processing platform. There were no other fees attached at all – no per-item fees, no monthly fees, no annual fees -nothing! Only 2.75%.
What is the Square price increase?
Square began with a 2.75% flat-rate processing platform. There were no other fees attached at all – no per-item fees, no monthly fees, no annual fees -nothing! Only 2.75%.
Square spent millions of dollars promoting that brand. They are the “simple, flat-rate processing guys.”
When the Durbin Amendment regulated debit transactions with a $0.22 per-item fee, Square began to shift. Just like all of us in the industry, the cost on pin debit or signature debit was $0.24/$0.25 per transaction after the interchange cost, network fees, etc.
That presents a problem when processing a small transaction. On a $10 transaction, 2.5% would go towards covering these costs. After Interchange percentage fees (about 5 basis points) and card brand fees (about 13/14 basis points), Square was losing money on many small-ticket merchant accounts.
The shift began slowly. They started with the Square register. Rather than 2.75%, merchants using the register were put at 2.6% + $0.10. Refer to my two previous episodes. I posted detailed information and screen shots about that. Then, just a few weeks ago, I’d guess 1.2 or 1.3 million merchants who were at 2.75% got switched to 2.6% + $0.10.
https://www.ccsalespro.com/how-to-compete-with-square-part-2/
https://www.ccsalespro.com/how-to-compete-with-square-part-2/
Square got tired of losing money. Go to squareup.com/pricing to see the current pricing. The flat-rate 2.75% is no more!
What does their price increase mean in our industry?
There are two misconceptions regarding the threat of Square in our industry.
The first misconception says, “Square only targets micro-merchant accounts. They are not competing for the larger, well established merchants I am selling.”
Here are some facts that refute this misconception.
· Last quarter 54% of Square’s volume came from merchants with over $10,000 per month in processing volume. That’s not a ton of volume, but it is nothing to ignore either.
· Last quarter 26% of Square’s volume came from merchants with over $40,000 per month in processing volume. These aren’t mega accounts either, but $40,000 is very significant. And these are the merchants most ISOs are targeting.
Square is continuing to grow their presence in brick and mortar businesses. They’re growing even more now with eCommerce and online merchants, and subscription / invoicing services such as attorneys.
Square is continuing to grow their presence in brick and mortar businesses. They’re growing even more now with eCommerce and online merchants, and subscription / invoicing services such as attorneys.
Read the list of companies they’ve acquired. They’re getting companies which allow them to target specific verticals in which they haven’t established a presence. For example, they now offer a POS system which specifically targets fine dining restaurants.
Now that Square has put millions into promoting their famous brand, they are leveraging it to target specific verticals.
The second misconception says, “Square is losing money. They’ll eventually go out of business, so I don’t need to worry about them.” I believe this is even more prevalent than the first misconception.
To refute this, you need a basic understanding of investing.
A 12% return is considered good on an investment. For easy math, let’s say this 12% is a 1% monthly return. This means we get a $1,000 monthly return on an investment of $100,000. If I invested $100,000 at this rate of return, you could say I lost $99,000 the first month. However, that’s not true. I simply made an investment that will return over time.
The second misconception says, “Square is losing money. They’ll eventually go out of business, so I don’t need to worry about them.” I believe this is even more prevalent than the first misconception.
To refute this, you need a basic understanding of investing.
A 12% return is considered good on an investment. For easy math, let’s say this 12% is a 1% monthly return. This means we get a $1,000 monthly return on an investment of $100,000. If I invested $100,000 at this rate of return, you could say I lost $99,000 the first month. However, that’s not true. I simply made an investment that will return over time.
Perhaps I invest another $100,000 the next month. Then I’d get a $2000 return. You could say I lost $197,000 ($200,000 invested – $1,000 Month One – $2,000 Month Two.) But there again, the return comes over a period of time. And I still have the value of my original investment.
Square has spent millions on their marketing. That’s an investment to buy merchant accounts. Although they’re losing money on the profit & loss reports, they are actually investing in merchant accounts that will generate a return for years to come. Keep in mind, Square is not paying residuals to agents and ISOs.
Square has spent millions on their marketing. That’s an investment to buy merchant accounts. Although they’re losing money on the profit & loss reports, they are actually investing in merchant accounts that will generate a return for years to come. Keep in mind, Square is not paying residuals to agents and ISOs.
The Square price increase may even take them over the all-important profitability threshold, if they don’t accelerate their growth instead. Their financial model is rock solid in my opinion. I read their last quarterly filing, and it looks great. They’re on a positive trend.
What does all this mean? Square is here to stay. They are coming after your merchant accounts, and you need to be ready!
What can we do about the Square price increase?
The price increase means Square is just another big processor like First Data and TSYS. They can no longer use the crazy branding strategy they’ve had for so long. Basically, Square has jumped into the mud pit with the rest of us!
They are no longer floating above the complexities of our industry with their all-in, flat-rate pricing model. Now we can compete on a level playing field.
Make sure you have a strategy and marketing materials. The competition comes down to technology.
Are you ready to train merchants and support your technology better than Square?
Are you ready to train merchants and support your technology better than Square?
Please listen to and read my last two episodes I just posted about Square. Find some good strategies for competing. Learn how to steal some Square accounts!
If you haven’t joined my Pro Club, you’re missing great information on this and many other relevant subjects. I’m sharing a new marketing piece with our Pro Club members entitled, “Is Square Increasing Your Price?” There are many headlines about their price increase from major news outlets, and we present alternatives like Clover and Poynt. You can find out what other industry people are saying in our exclusive Facebook group. Join today.
If you haven’t joined my Pro Club, you’re missing great information on this and many other relevant subjects. I’m sharing a new marketing piece with our Pro Club members entitled, “Is Square Increasing Your Price?” There are many headlines about their price increase from major news outlets, and we present alternatives like Clover and Poynt. You can find out what other industry people are saying in our exclusive Facebook group. Join today.
Let’s see how Square likes competing on a level playing field! Get busy in the competition!
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