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A shot across the bow against Square. This will be very interesting. Payments has always been a race to the bottom, I wonder how quickly rates will drop for POS

A shot across the bow against Square. This will be very interesting. Payments has always been a race to the bottom, I wonder how quickly rates will drop for POS payment providers now that Stripe is going after that business and directly against Square.

tyingq 8y ago
I'm surprised either Square or Stripe would do well in the "card present" space. 2.9% + 30 cents is pretty big markup if you're "card present". Edit: See comment below, apparently the 30 cents is now 5 cents for card present. Helpful, though doesn't necessarily close the whole gap, depending on transaction mix.
- Zombieball 8y ago
  Could you clarify? Is this markup only on card present transactions?
  - deleted 8y ago
    [deleted]
  - tyingq 8y ago
    It's specific to the US. Within the US, if have your own merchant account, "card present" is a lot cheaper than "card not present". So far, companies like Paypal, Square, and now Stripe, don't pass those savings on. They all have one rate that doesn't differentiate.
    - docker_up 8y ago
      More importantly, fraud rates are much lower with CP than CNP. If the Visa/MC in the US goes with a PIN-type system like the rest of the world, fraud rates drop to near zero, which makes Card Present insanely profitable for them.
  - jdmichal 8y ago
    Card-present transactions are typically cheaper, because the risk of fraud is better mitigated. With chip cards, the fraud risk for card-present is almost entirely in physically stolen cards. (Sophisticated shops could duplicate magnetic stripes. That's a lot harder to do with chips.) Compared to online, where all you have is the card number and the CVV, both of which are easily duplicated. And this is why tokenization is such a big deal. Tokenization means you don't store the actual card number, and the token you do store is tied directly to your merchant, so it's not widely reusable.
- mikesickler 8y ago
  For low value, high volume merchants, Square's rate is extremely competitive.
  - tyingq 8y ago
    I don't see how that's possible. Low value would skew it even more versus 2.9% + 30 cents, because you'll have more debit cards for low value transactions. Debit card transactions (pin or not) are cheaper post Durbin amendment. Open to stats that say otherwise.
    - traek 8y ago
      > I don't see how that's possible. Low value would skew it even more versus 2.9% + 30 cents Because that’s not Square’s rate, they charge a flat 2.75%.
      - jjeaff 8y ago
        And a regulated debit card is around a 10 cents flat fee. No percentage. Square's fees are pretty high unless you are processing less than say $150k a year.
- jacobn 8y ago
  From the landing page: "In-person payment processing: 2.7% + 5¢" (may be getting A/B tested if you're seeing something different?)
  - tyingq 8y ago
    Ahh, that's helpful. I went to the main pricing page. It is on the landing page, as you say...but really far down the fold.
  - ale918 8y ago
    actually, their pricing is 2.5% +10c for custom in person payments (Reader SDK) https://squareup.com/us/en/developers/reader-sdk https://squareup.com/us/en/developers/reader-sdk
- pbreit 8y ago
  Square is 2.75% with no fixed fee. This is by far the best rate you can get for low amount charges and why Square enabled an entire new category of credit card merchants like fast food.
  - jjeaff 8y ago
    That's not that low for card present. Except for very low volume sellers. What fast food companies are using square? I've only seen square used in small shops.
    - pbreit 8y ago
      For $5-10 purchases you'd cut your CC fees in half. That's a lot. Pretty much every food truck and many non-national fast food restaurants and cafes use it.
- password03 8y ago
  card present fees are vastly different (lower) than not present, and there is usually no fixed fee.
edwinwee 8y ago
I work at Stripe. This isn't really competitive with Square—very different customers.
- docker_up 8y ago
  I worked in payments. Respectfully, you really shouldn't be talking on behalf of Stripe. It's clear that a card present product, which I believe is new for Stripe, is in direct competition with Square. Even if right now it's not being marketed towards the same customer base as Square, it's clear that with a few tweaks of the app plus a change in the manufacturing process, you could easily create Square-like POS systems. Why would Stripe leave out such a huge, proven market when it's clear this product is a stepping stone towards full POS systems?
  - briandear 8y ago
    Your average pizza shop isn’t going to build a POS.
    - docker_up 8y ago
      No, I meant Stripe will build it. It's not much different from what they just created.
      - oculusthrift 8y ago
        yeah i don’t see how this isn’t obvious.
- csytan 8y ago
  Could you clarify? I'm guessing you mean.. Square: Small/individual merchants, Etsy style physical shops, trade shows, etc. Stripe: large retailers, grocery stores, stores with many locations etc.
  - jjeaff 8y ago
    What large retailers are using stripe? The fees would be too high.
danielx 8y ago
And PayPal with their announced purchase of iZettle
dawhizkid 8y ago
I also thought it was a race to the bottom, but the rising valuations of payments companies is telling me otherwise.
- docker_up 8y ago
  All tech companies are rising. It's similar to the dotcom boom in my opinion where all tech stocks went up and everyone thought they were stock picking geniuses. Don't attribute it to anything more than this. All it takes is for a single payment provider to start dropping rates and it will follow. Right now there hasn't been one yet, because they're know it's mutually-assured destruction. But if someone can get a handle on fraud rates, they can cut the rates down to very thin margins and work off a volume.
- password03 8y ago
  It is a race to the bottom. Payment processing has become so commoditised that you need huge scale.. see the Worldpay/Vantiv merger. What Square and Stripe are doing is adding value and simplifying the complexities around payments. They will only be able to rinse small merchants with the high fees who need the equipment also (can't afford bespoke systems). The larger tier one retailers get payments for near zero fees as they are literally just consuming the processing and they bring their own system/hardware/management.

tyingq 8y ago

I'm surprised either Square or Stripe would do well in the "card present" space. 2.9% + 30 cents is pretty big markup if you're "card present". Edit: See comment below, apparently the 30 cents is now 5 cents for card present. Helpful, though doesn't necessarily close the whole gap, depending on transaction mix.

Zombieball 8y ago
Could you clarify? Is this markup only on card present transactions?
- deleted 8y ago
  [deleted]
- tyingq 8y ago
  It's specific to the US. Within the US, if have your own merchant account, "card present" is a lot cheaper than "card not present". So far, companies like Paypal, Square, and now Stripe, don't pass those savings on. They all have one rate that doesn't differentiate.
  - docker_up 8y ago
    More importantly, fraud rates are much lower with CP than CNP. If the Visa/MC in the US goes with a PIN-type system like the rest of the world, fraud rates drop to near zero, which makes Card Present insanely profitable for them.
- jdmichal 8y ago
  Card-present transactions are typically cheaper, because the risk of fraud is better mitigated. With chip cards, the fraud risk for card-present is almost entirely in physically stolen cards. (Sophisticated shops could duplicate magnetic stripes. That's a lot harder to do with chips.) Compared to online, where all you have is the card number and the CVV, both of which are easily duplicated. And this is why tokenization is such a big deal. Tokenization means you don't store the actual card number, and the token you do store is tied directly to your merchant, so it's not widely reusable.
mikesickler 8y ago
For low value, high volume merchants, Square's rate is extremely competitive.
- tyingq 8y ago
  I don't see how that's possible. Low value would skew it even more versus 2.9% + 30 cents, because you'll have more debit cards for low value transactions. Debit card transactions (pin or not) are cheaper post Durbin amendment. Open to stats that say otherwise.
  - traek 8y ago
    > I don't see how that's possible. Low value would skew it even more versus 2.9% + 30 cents Because that’s not Square’s rate, they charge a flat 2.75%.
    - jjeaff 8y ago
      And a regulated debit card is around a 10 cents flat fee. No percentage. Square's fees are pretty high unless you are processing less than say $150k a year.
jacobn 8y ago
From the landing page: "In-person payment processing: 2.7% + 5¢" (may be getting A/B tested if you're seeing something different?)
- tyingq 8y ago
  Ahh, that's helpful. I went to the main pricing page. It is on the landing page, as you say...but really far down the fold.
- ale918 8y ago
  actually, their pricing is 2.5% +10c for custom in person payments (Reader SDK) https://squareup.com/us/en/developers/reader-sdk https://squareup.com/us/en/developers/reader-sdk
pbreit 8y ago
Square is 2.75% with no fixed fee. This is by far the best rate you can get for low amount charges and why Square enabled an entire new category of credit card merchants like fast food.
- jjeaff 8y ago
  That's not that low for card present. Except for very low volume sellers. What fast food companies are using square? I've only seen square used in small shops.
  - pbreit 8y ago
    For $5-10 purchases you'd cut your CC fees in half. That's a lot. Pretty much every food truck and many non-national fast food restaurants and cafes use it.
password03 8y ago
card present fees are vastly different (lower) than not present, and there is usually no fixed fee.

edwinwee 8y ago

I work at Stripe. This isn't really competitive with Square—very different customers.

docker_up 8y ago
I worked in payments. Respectfully, you really shouldn't be talking on behalf of Stripe. It's clear that a card present product, which I believe is new for Stripe, is in direct competition with Square. Even if right now it's not being marketed towards the same customer base as Square, it's clear that with a few tweaks of the app plus a change in the manufacturing process, you could easily create Square-like POS systems. Why would Stripe leave out such a huge, proven market when it's clear this product is a stepping stone towards full POS systems?
- briandear 8y ago
  Your average pizza shop isn’t going to build a POS.
  - docker_up 8y ago
    No, I meant Stripe will build it. It's not much different from what they just created.
    - oculusthrift 8y ago
      yeah i don’t see how this isn’t obvious.
csytan 8y ago
Could you clarify? I'm guessing you mean.. Square: Small/individual merchants, Etsy style physical shops, trade shows, etc. Stripe: large retailers, grocery stores, stores with many locations etc.
- jjeaff 8y ago
  What large retailers are using stripe? The fees would be too high.

danielx 8y ago

And PayPal with their announced purchase of iZettle

dawhizkid 8y ago

I also thought it was a race to the bottom, but the rising valuations of payments companies is telling me otherwise.

docker_up 8y ago
All tech companies are rising. It's similar to the dotcom boom in my opinion where all tech stocks went up and everyone thought they were stock picking geniuses. Don't attribute it to anything more than this. All it takes is for a single payment provider to start dropping rates and it will follow. Right now there hasn't been one yet, because they're know it's mutually-assured destruction. But if someone can get a handle on fraud rates, they can cut the rates down to very thin margins and work off a volume.
password03 8y ago
It is a race to the bottom. Payment processing has become so commoditised that you need huge scale.. see the Worldpay/Vantiv merger. What Square and Stripe are doing is adding value and simplifying the complexities around payments. They will only be able to rinse small merchants with the high fees who need the equipment also (can't afford bespoke systems). The larger tier one retailers get payments for near zero fees as they are literally just consuming the processing and they bring their own system/hardware/management.