Why the future of money may be square

Tweet


  Share

Back in November, we wrote a blog article entitled "7 Ways Smart Phones are the Wallets of the Future." One of the things we mentioned was Twitter creator, Jack Dorsey, and his mobile payment application and portable card reader called Square, which allows users to accept credit card payments with their mobile phones. Simply swipe the card through the gadget that attaches to the phone's headphone jack and money is transferred from the card to your Square account.

In a bold move on Monday, Square announced that it was dropping its $0.15 processing fee.  Calling it "simply revolutionary,’’ Square will only charge merchants their flat 2.75% processing fee. And no other charges. The elimination of this fee is good news for those SMBs that have a high volume of low cost transactions. For example, the vending truck in the video below, or a used bookstore. These types of SMBs are also, coincidentally, the market that Square is going after.

Although you may think that eliminating a $0.15 fee would not make much difference, think of it this way. Let's say you sell a widget for $5. A $0.15 fee represents 3% of the price. Eliminating this cost increases revenues immediately by 3%. And when you compare it to the fees from other credit card processing companies, the flat 2.75% seem quite reasonable (even a bargain in some cases).

This seems to be just the beginning for Square. Its aggressive move in eliminating this fee has made making mobile payments for virtually anything more palatable. For example, let's say your friend owed you $20, would you care that you need to pay $0.55 if it means you can get your money now? 

For the time being—and that's the key phrase here—Square is not out to replace the credit card machines at your local large retailers. However, it does seem to be happy to service the millions of transactions that take place every day between consumers and SMBs as well as between person to person. 

And if you think about it, that has been a huge untapped market. Think of the millions of dollars spent every year at flea markets, consignment shops, craft fairs, local food stands, yard sales, farmers markets, even sales though classified ads and craigslist. These sellers have never been afforded the ease of accepting credit card payments.

Now, as long as the seller doesn't mind paying 2.75%, you may be able to buy that old telephone at the next yard sales using your Mastercard card...and that truly would be priceless. 

Have you used a Square device? What do you think about it?

 Kevin Duffy is the Creative Director for The Duffy Agency's Boston office.