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Square does high enough volume to negotiate better rates than you'd expect.

by jes5199 11y ago

rdl 11y ago
Maybe on credit cards. Probably not on low value debit card transactions, specifically the fixed fee.
mbesto 11y ago
The size and strength of our payments and POS business have allowed us to develop a deep understanding of our sellers’ business performance and to build a cohesive commerce ecosystem. As such, we are well positioned to provide financial services and marketing services to sellers efficiently and intelligently. For example, one of our financial services, Square Capital, uses our deep understanding of our sellers’ businesses to proactively underwrite and extend cash advances to them. Although Square Capital is still in its early stages, we have already advanced over $225 million since launching it in May 2014. Square Capital demonstrates how our services can rapidly reach significant scale through a combination of strong demand and our direct, ongoing interactions with our sellers. Although Square Capital currently does not contribute a significant amount of revenue to our business relative to our payments and POS services, our software and data product revenue, including revenue derived from Square Capital, has grown quickly, and we expect these products will contribute a larger portion of our total revenue over time. Marketing services, such as Square Customer Engagement, give sellers easy-to-use tools to help them close the loop between communication with a buyer and ultimately a new sale. We currently see more than 1.5 million monthly feedback communications sent by buyers to sellers through digital receipts. Together, our financial services and marketing services provide sellers with access to capital and access to customers, making it easier for them to accomplish their goals. [0] Transaction fees is a loss leader, but this isn't their business model. They'll make a majority of their profits on small business loans. Example: Local burger shop - I need a $10,000 loan to buy a new stove. Square - Based on your commercial transaction history, we see you'll be able to pay the loan off in exactly 17.2 months. We'll give you $10,000 at $foo APR for 17.2 months. [0] - Square S-1 https://www.sec.gov/Archives/edgar/data/1512673/000119312515343733/d937622ds1.htm https://www.sec.gov/Archives/edgar/data/1512673/000119312515...
- lsc 11y ago
  Oh my... merchant account advance loans are the "payday loans" of the small-business world. Much like the 'payday loan' business, the rates usually end up being usurious, but if you are cool with that, there's certainly money to be made. But... that's completely not what I thought square was doing.
- caseyf7 11y ago
  True, but this type of loan has been around a long time in the payments world. These are loans of last resort and the other processors haven't been able to make them into multi-billion dollar businesses so I'm a little skeptical that Square can do it.
- deleted 11y ago
  [deleted]
abalone 11y ago
Your source, or is this pure speculation? Even Walmart can't negotiate Visa/MC interchange fees.[1] And they do ~400X Square's volume. It's not just a matter of merchant/processor size. Once enough consumers have adopted it as their primary/only card, the card network has an extremely strong position. (This is why AmEx rates are more negotiable; it's usually an alternate card.) [1] They do lawsuits instead. http://www.reuters.com/article/2014/03/27/us-walmart-visa-lawsuit-idUSBREA2Q2BJ20140327 http://www.reuters.com/article/2014/03/27/us-walmart-visa-la...
- brwnll 11y ago
  That lawsuit isn't about lowering the transaction rate, it's about collusion between credit companies to keep their rates in line with each other. First hand, I've seen a small ecommerce shop have rates lowered a 1/4 percent doing less than $1m/y. Second hand, Costco, who in the US and Canada just switch from AmEx to Visa as their accepted card, went through long negotiations that resulted in booting Amex for not matching the discounted rates Visa was willing to offer.

Square does high enough volume to negotiate better rates than you'd expect.

by jes5199 11y ago

Square does high enough volume to negotiate better rates than you'd expect.

rdl 11y ago

Maybe on credit cards. Probably not on low value debit card transactions, specifically the fixed fee.

mbesto 11y ago

The size and strength of our payments and POS business have allowed us to develop a deep understanding of our sellers’ business performance and to build a cohesive commerce ecosystem. As such, we are well positioned to provide financial services and marketing services to sellers efficiently and intelligently. For example, one of our financial services, Square Capital, uses our deep understanding of our sellers’ businesses to proactively underwrite and extend cash advances to them. Although Square Capital is still in its early stages, we have already advanced over $225 million since launching it in May 2014. Square Capital demonstrates how our services can rapidly reach significant scale through a combination of strong demand and our direct, ongoing interactions with our sellers. Although Square Capital currently does not contribute a significant amount of revenue to our business relative to our payments and POS services, our software and data product revenue, including revenue derived from Square Capital, has grown quickly, and we expect these products will contribute a larger portion of our total revenue over time. Marketing services, such as Square Customer Engagement, give sellers easy-to-use tools to help them close the loop between communication with a buyer and ultimately a new sale. We currently see more than 1.5 million monthly feedback communications sent by buyers to sellers through digital receipts. Together, our financial services and marketing services provide sellers with access to capital and access to customers, making it easier for them to accomplish their goals. [0] Transaction fees is a loss leader, but this isn't their business model. They'll make a majority of their profits on small business loans. Example: Local burger shop - I need a $10,000 loan to buy a new stove. Square - Based on your commercial transaction history, we see you'll be able to pay the loan off in exactly 17.2 months. We'll give you $10,000 at $foo APR for 17.2 months. [0] - Square S-1 https://www.sec.gov/Archives/edgar/data/1512673/000119312515343733/d937622ds1.htm https://www.sec.gov/Archives/edgar/data/1512673/000119312515...

lsc 11y ago
Oh my... merchant account advance loans are the "payday loans" of the small-business world. Much like the 'payday loan' business, the rates usually end up being usurious, but if you are cool with that, there's certainly money to be made. But... that's completely not what I thought square was doing.
caseyf7 11y ago
True, but this type of loan has been around a long time in the payments world. These are loans of last resort and the other processors haven't been able to make them into multi-billion dollar businesses so I'm a little skeptical that Square can do it.
deleted 11y ago
[deleted]

abalone 11y ago

Your source, or is this pure speculation? Even Walmart can't negotiate Visa/MC interchange fees.[1] And they do ~400X Square's volume. It's not just a matter of merchant/processor size. Once enough consumers have adopted it as their primary/only card, the card network has an extremely strong position. (This is why AmEx rates are more negotiable; it's usually an alternate card.) [1] They do lawsuits instead. http://www.reuters.com/article/2014/03/27/us-walmart-visa-lawsuit-idUSBREA2Q2BJ20140327 http://www.reuters.com/article/2014/03/27/us-walmart-visa-la...

brwnll 11y ago
That lawsuit isn't about lowering the transaction rate, it's about collusion between credit companies to keep their rates in line with each other. First hand, I've seen a small ecommerce shop have rates lowered a 1/4 percent doing less than $1m/y. Second hand, Costco, who in the US and Canada just switch from AmEx to Visa as their accepted card, went through long negotiations that resulted in booting Amex for not matching the discounted rates Visa was willing to offer.