4 ms·
That's a great example. For contra-contrarian reasons: If your coffee is less than $7.75 (debit card) or $4.00 (credit card), square loses money (cf Starbucks)
by ksherlock 11y ago
That's a great example. For contra-contrarian reasons: If your coffee is less than $7.75 (debit card) or $4.00 (credit card), square loses money (cf Starbucks).
- Jormundir 11y agoTheir contract with Starbucks is ending soon. Going forward their reader fees will be profitable to the company.
- blackguardx 11y agoNot always. There is a minimum ticket price that must be met for Square to make money. Square charges merchants a fixed percentage, but Square's costs aren't so simple. There is a reason why tiny corner stores charge extra to process a credit card transaction under $10. or so.
- dangrossman 11y agoIt's not just Starbucks. He did those calculations based on the interchange fees Square pays to Visa/MasterCard/AmEx compared to the flat 2.75% it charges merchants. To swipe a debit card, Square has to pay at least $0.21 + 0.05% per transaction. 2.75% of any amount less than $7.75 doesn't cover the $0.21 fixed cost. They lose money. Same deal with credit except it's $0.10+ (and 1-3.5%) instead, so they're only losing money on every swipe under $4. There's also some amount of markup over interchange going to their underwriting banks (JP Morgan Chase and Wells Fargo) which makes the minimum charges at which there's any profit even a bit higher than that. Basically, coffee shops are loss leaders for Square.
- pbreit 11y agoThis is a non-issue. Square has 30-35% margins on its core processing business which is exceptional. The 2.75% rate with no fixed portion was a smart way to attack its core market of small business, low value transactions.