Effects of Square Payments on Small Businesses
These days, it’s cool to be a Square, at least when you’re running a business. Square was launched in 2010 by Jack Dorsey, the co-founder of Twitter, and after a little more than a year it’s now responsible for more than $11 million in credit card payments per day. If you aren’t familiar with the service, Square is a miniature credit card reader that plugs into any iPhone, iPad, or Android, allowing you to accept credit card payments wherever, whenever.
Why all the hype though? After all, we’ve had credit cards for decades, and businesses have had no problem integrating them into their day to day operations, right? While that may be true for medium to large companies, small businesses have been getting the short end of the stick when it comes to non-cash transactions. Let’s take a look at what typical setup for a company that accepts credit cards.
1) First you need a merchant account, which requires entering into a contract with a third party provider. With a merchant account, you become responsible for authorization fees, statement fees, and the monthly minimum requirement.
2) Then you need a point of sale terminal, that ubiquitous black swipe box next to every cash register, which is either purchased or leased from your merchant account provider. When a card is swiped the terminal stores the card information temporarily, submits a verification request, and then uploads the information.
Between the fees, the equipment, the licensing, and especially the fees, just the simple idea of accepting credit cards becomes a massive percentage of a small business’ monthly expenditures.
And then you have Square. It’s free, plugs directly into your smart phone or iPad, and says “screw it” to monthly fees, contracts, and extra equipment. You just download the app, plug in the device, and activate your account. The Square reader is mailed to you for free.
What About Security?
One of the (many) innovative features of the Square payment system is that it doesn’t actually store any credit card data. The device plugs into the headphone jack and immediately converts the info into audio and encrypts it. What that means is that neither the device nor the merchant have access to the sensitive data. Instead of signing a receipt, the customer presses his or her finger onto the iPad’s touch screen, and the receipt is sent via SMS or email or, as we’ll talk about in just a second, printed like normal if the customer wishes.
Reaching yet another milestone, Square recently implemented a software upgrade in the Square app that allows both customers and merchants even more flexibility in the payment process. The new Card Case app will wirelessly transmit data from nearby customers who have shopped at your store previously, facilitating the transaction process even more. The customer just tells you their name, you ID them based on the photo in their profile, and at the push of a button the transaction goes through.
Additionally, you can now recognize repeat customers and automatically integrate a “regular” discount into their purchases. Everyone can accept credit cards now: flower shops, bakeries, taxi drivers, even the kid next door with the lemonade stand. Best of all, it makes it easier than ever to track your online receipts and spending.