|Featured Mobile Payments Processors|
Last Updated: November 20th, 2013
With over 2,000,000 users and more than $8 billion in annual payment processing, Square has become a heavyweight in the world of point of sale and credit card processing. Square was started in February of 2009 by Jack Dorsey, co-founder of Twitter. Over the course of five years, Square made a name for itself by creating a product that allows virtually anyone to accept credit card payments using their personal mobile device--a truly groundbreaking advance for businesses and individuals alike. A major $25 million dollar investment by Starbucks in late 2012 further upped Square's street cred and has prompted competition from big-name companies like Intuit, PayPal, and PayAnywhere.
Square has a shockingly simple setup process: create an account by providing some basic contact information to verify your identity; download the app onto your iPad, iPhone or Android device; connect your bank account to the app; and then just wait for your free credit card swipe to arrive in the mail. Once the little plastic card reader arrives you plug it into the headphone jack of your mobile device and, just like that, you're ready for immediate payment processing. Square has zero setup cost, which is a huge part of its attraction.
Unfortunately Square's widespread attraction comes with good news and bad news. The good news is that Square is innovative in a lot of ways. The Square Register POS app has a smooth and intuitive interface that a five year old could figure out. Square Wallet, a creative consumer-end payment app, allows customers to access a merchant directory with all Square businesses in their current location. When customers visit Square businesses they can earn rewards and complete digital punch cards as they order and pay for their purchases with the Wallet app. These forward thinking developments along with several other creative software features are what Square has going for it.
The bad news is that (as we all know) initial attraction isn't enough to sustain a relationship long term: you've got to have a solid foundation if there's any chance of survival. This is the point where Square starts to take a nose dive. When you sign up for a Square account you're signing up for more than a point of sale system--Square facilitates all the payment processing too, powered by Chase Paymentech. It's a package deal. While Square's anyone-can-accept-credit-card-payments philosophy seems great, it has some hidden costs. The main issue is that without any credit checks and limited merchant underwriting, Square is taking on a higher level of risk than more traditional payment processors. Square is notorious for mitigating this additional risk in ways that hurt merchants--primarily by placing excessive holds on funds and accounts that appear suspicious. "Suspicious" can be anything from fraudulent customer chargebacks to an unusually high monthly average or sale.
Both the Better Business Bureau and Ripoff Report are overrun with Square merchants who have some variation on the story of, "Square placed a hold on thousands of dollars in sales and even though I provided evidence that the sales were legitimate I haven't been able to access the funds in months and no one from support will respond to my inquiries." Square is also notorious for having bottom of the barrel support: there is no direct phone line and all inquiries must be funneled through either email or Twitter with less-than-great odds of a satisfactory response.
After an extensive review process my conclusion is that, despite its popularity, Square is only a useful point of sale software and payment processing option for a certain set of businesses. It could be a potential headache for others. Read on for a breakdown of Square's specs and features and decide for yourself whether it might be the right solution for your business.
San Francisco, CA
Pricing/Fees and Rates:
Technically Square is free. The Square Register app is free and so is the credit card reader. They make a profit through credit card processing fees. Square offers a fixed-price processing rate with no additional monthly or annual fees. While they had a short-lived monthly option of $275 with 0% swiped transaction fees (among other stipulations), Square stopped offering this fee structure to new customers on November 8th, 2013. All accounts currently using this pricing option will revert to the standard fixed-rate structure on January 2nd, 2014.
The only pricing option offered by Square is:
- Swiped card - 2.75%
- Square Wallet - 2.75%
- Square Market - 2.75%
- Gift cards - 2.75%
- Keyed-in cards - 3.5% + 15¢
Non-negotiable. No interchange-plus pricing (sorry), no tiered pricing either (phew). Of course this sort of rate structure reduces overall cost transparency, since you don't get to see the actual interchange/assessment fees charged to the processor. That said, they make up for this in my book by having absolutely no additional fees. On the Square site, you'll see that there are no fees for:
- Early termination
- Cash payments
- PCI compliance
Additionally, you won't see any monthly minimums, statement fees, inactivity fees, address verification fees, batches fees, application fees... so on and so forth.
Square recently made another step in the right direction by eliminating its cap on keyed-in payments. You used to have any keyed payments processed over $2,002 each week held for 30 days. Now you won't have to keep track of this or worry about not having access to your funds if you make a big sale. Good job Square! (But remember, they can still hold your funds in a reserve account if they see transactions as high-risk.)
Contract Length and Early Termination Fee:
Square has an ideal setup here, way better than the processing industry standard (which is 3 years, auto-renewing, and carries an average of $400 in early termination fees). With Square, you can close your account at anytime with no penalties, no fees, and no hidden stipulations. You don't even have to give any notice. Do, however, make sure all of your pending transactions have cleared, as they will be cancelled when you close your account. Square also reserves the right to hold any funds in a reserve account even after you close your account with them to cover any possible chargebacks or additional expenses.
This is a true month-to-month arrangement, giving you complete freedom. Needless to say, I really like this aspect of Square! Want to take a look at their merchant agreement to verify this yourself? Check it out here.
Sales and Advertising Transparency:
For me, Square does very, very well in this category. Everything they say in their advertising checks out, and they don't use any wacky sales gimmicks. Their "free" reader is actually free, and they really don't charge any additional fees. They could definitely state more information about account holds, why they happen and how to avoid them, though. This is the biggest complaint from merchants using Square, and surely the company is aware of this. Not disclosing this in plain sight as a possibility definitely equals a lack of transparency. They do make it pretty clear that no phone-based support exists, although many merchant still complain about this.
Aside from that, however, I couldn't ask for more from Square. All fees, rates, and important information appear in their sales copy, and just about everything else you could ever want to know about processing with Square appears in detail within their extensive Help Center.
Web-Based or Locally-Installed:
Square runs off of a web/cloud based app. All of your shop data is stored in cloud servers and wirelessly transmitted to your devices.
Square is probably best matched to retail businesses, but it can be tailored to almost any setup that requires a checkout or mobile payment processing. Square can be used for boutiques, grocery stores, book shops, festivals, craft fairs, hair salons, spas...and so on and so forth. It would also work for therapists, independent contractors, taxi drivers, handymen, and locksmiths. In terms of the service industry, Square has recently added several software updates to accommodate the service industry, including the ability to edit orders, use a barcode scanner, and create product modifiers. While some small cafes, food trucks and pop-up stands are already using Square, it's likely that Square will try to move into a new market by adding more restaurant-friendly options.
Specific Size of Business:
Square is definitely best for small businesses. Square can be used with multiple devices as long as all devices are logged into the same account. Square can also handle multiple business accounts on the same card reader and mobile device. At this point you can't connect your Square account across multiple locations.
Ease of Use:
After creating a "demo" shop with a couple different categories and products, I tested how long it took me to get familiar with the Square interface. I had the whole thing down in under an hour and was impressed by its smooth, intuitive layout. There's no doubt that Square is doing okay in the looks department. One interesting thing about the interface is that you can manage the app in different ways. For my demo I downloaded the app onto my iPad and then added all of the categories and products by logging into my Square account on my laptop web browser. All of the inventory additions created on my laptop were quickly synced to the iPad. Square also allows you to add and manage inventory items directly on the iPad, which is not the case for a lot of other cloud POS software.
Because Square is compatible with so many devices it interacts with them in different ways. For example, the iPad can display product categories, while the iPhone cannot. Several Android devices are only able to accept manual credit card entries while others have trouble displaying the app correctly. Square has a "devices with known issues" article to inform you of potential compatibility difficulties with your device. The other hardware issue to be wary of is the plastic credit card swipe. I came across many reviews written by merchants who explained how they sometimes have to swipe a card multiple times to get it to work, which is a count against ease of use.
Aside from being aware of device-specific issues, I found Square very easy to use. Creating categories, products, discounts, product modifiers, and tax brackets was simple. I was a fan of the favorites category that allows you to keep up to 125 popular products on a virtual "shelf" for quick checkout access. With the flip of a switch you can add your business profile to Square's GPS Merchant Directory. You can also add specific products that customers can order from their phone using the Square Wallet app. I would have liked to see an import/export inventory option on the web-browser back end, but it's probably not a big issue for most small businesses with a manageable inventory.
A final note on ease of use is regarding Square's recent update to the checkout process for businesses with the tip option enabled. In the past, after swiping their credit card, customers were prompted to a page with a virtual signature pad and the option to leave a tip. Square has divided this process into three parts: first the credit card is swiped, then the customer is directed to the page with the option for a tip, and finally they are asked to sign for their purchase. iTunes is full of frustrated merchants who say they feel the new approach is confusing and makes customers feel like they're obligated to leave a tip.
Overall, Square gets great marks for its aesthetic design and intuitive layout and a lower score on hardware and interactive features like the credit card swipe and the tip options.
Hardware and Software Requirements:
The Square Register and Square Wallet apps will run on most Apple iOS devices with 5.0 or higher and Google Android devices with 2.2 or higher. Square states that their apps may work on some Android tablets but it does not officially support them or guarantee compatibility. Also Square cannot take payments on laptops or computers, although a back end dashboard area can be accessed from any computer with a web browser and WiFi connection.
Another thing to note is that merchants using smartphones to process payments will not be able to connect to a receipt printer, cash drawer, or barcode scanner. All peripheral hardware setups need to be paired with an iPad. Square offers two "Business in a Box" bundles that include basic hardware for getting started. I'll go over these bundles as well as the other hardware compatible with Square.
- Bundles - Square offers the "Paperless" Business in a Box bundle which assumes you'll be sending customers digital receipts (eliminating the need for printers). The Paperless package includes Square card readers, a Heckler design iPad stand, and an APG Vasario 1616 cash drawer. It costs $249. The "Printing" Business in a Box bundle includes everything you need to print receipts, kitchen orders, and sales reports directly from your iPad. It comes with Square card readers, a Heckler design iPad stand, an APG Vasario 1616 cash drawer and a Star Micronics TSP143L Receipt Printer. The Printing bundle totals $499.
- Receipt Printers - Square is compatible with the Star TSP 143 LAN printer and the Star TSP 650 with Ethernet interface printer. These run approximately $220 and $285 respectively.
- Kitchen Ticket Printers - Wirelessly print kitchen tickets with the Star SP742 ML printer, which will cost you around $250.
- Cash Drawers - Square works with Vasario models 1416 and 1616. These are both approximately $100.
- Barcode Scanners - Scan products into an order with the Bluetooth Socket Mobile 7Ci. You can pick one up for about $250.
- iPad Stand - iPad stands are important both for protecting your devices and for allowing easy customer access with swivels and rotating frames. Prices really vary according to the model but you can estimate spending $150-$200 per stand.
Despite Square’s reputation for terrible support and questionable fraud prevention policies, it clearly has some things going for it with over 2,000,000 users and counting. There’s no doubt that Square has brought some major innovations to the point of sale industry. Because of its huge network of merchants, Square has the leverage to explore some creative marketing approaches that are inaccessible to smaller POS companies. I’m going to briefly cover some of the most interesting features (if you want a full feature breakdown you can find it here).
One of Square’s most groundbreaking features is Square Wallet, the free customer–end app that offers benefits to both customers and business owners. Square Wallet acts as a sort of virtual wallet that can be used at businesses that run on Square. When a customer downloads Square Wallet onto her phone she is prompted to enter her credit card information, which is then stored in the app. Wallet tracks her current location and shows her all the local businesses that use Square. She can add Merchant Cards from her favorite businesses (sort of like a virtual business card) to her Wallet account and use them to order and pay for items ahead of time. Once she reaches the counter all she has to do is give her name—the transaction is already finished and paid for. Square markets this as “hands-free” checkout.
Square has some other clever features built into Wallet. Customers can buy and send gift cards directly from their Merchant Cards on Wallet. Gift card recipients have the option to redeem the cards with their Square Wallet and Apple Passbook accounts or by printing them out. Square Wallet customers can also earn rewards with digital punch cards that track visits and purchases. Regular customers can earn "regular" status indicated by a blue ribbon on their receipt. Square merchants can offer first-time visitor incentives and deals through Wallet. All of these marketing avenues offer business owners creative ways of attracting business and encouraging loyal customers.
Some reviews on iTunes mention difficulties with bugs, errors and crashes and when something goes wrong with the app it can hold up lines and frustrate customers. When it works, Wallet is an amazing concept that has the potential to be another industry game changer. The more businesses that adopt Square, the more powerful Square Wallet will be as a marketing tool.
I also want to briefly mention Square's Mobile Staff option because it's a feature I haven't seen other POS systems offer. Mobile Staff works on the iPad, iPad mini, iPhone, iPod touch and supported Android mobile devices and it allows staff members to accept payments on your behalf. You can send an invite to staff members which then prompts them to create a Square account that is linked to your Square Register account. Any transactions they process are directly deposited into your account. Privacy is built into the Mobile Staff option--staff members can't access your Square account, financial data, or payments accepted by other staff members.
Integrations and Add-Ons:
Square does not offer an API and has no integrations or add-ons through third party developers.
Compatible Credit Card Processors:
As mentioned above, when you open an account with Square you are agreeing to run your transactions through their payment processor, which is how they turn a profit on a free product (the Square Register app). Square is actually an aggregator, meaning they bundle the various pieces of payment processing and offer it to Square merchants at their 2.75%/transaction rate. Chase Paymentech processes Square transactions and JP Morgan Chase is Paymentech's acquiring bank.
Customer Service and Technical Support:
Support is Square's weakest service by far. Support is only available via email and Twitter. I found hundreds of complaints from Square merchants who were trying to resolve issues (often regarding thousands of dollars of frozen revenue) without being able to speak to a real human being or receive a satisfactory response via email. If you comb the Square website you won't be able to find a phone number or a direct email address. In my opinion, this is a huge red flag.
I will say that Square does have one of the best Help Centers I've seen. There are dozens and dozens of well-written, well-organized articles covering every aspect of Square's features. Any questions I had relating to the actual setup and use of Square were answered with a quick search in the Help Center. Chances are you won't need much help from Square support to get your business up and running. The problem arises when you encounter a financial issue relating to holds, freezes or chargebacks. It's enormously frustrating to attempt to resolve these issues via an email support system that is not known for being reliable or timely.
Below is a list of the resources that Square does offer:
- Contact Us Form - This online Contact Us form is the primary avenue for direct communication with Square support.
- Help Center - Read up on all Square features in the Help Center.
- Twitter - Square has a very active Twitter feed with over 120,000 followers.
- Youtube - The Square Youtube page has both promotional videos and a series of instructional shorts.
- Facebook - Square's Facebook highlights a lot of Square merchants and news articles about Square. Open posts by Facebook users are not allowed on Square's Facebook page (they do allow comments on items that they post).
Negative Reviews and Complaints:
A quick Google search will produce way more feedback on Square then you could ever hope to read. They have a B+ with the BBB despite having 744 complaints filed in the past three years as of this update, with well over half of those (414, to be exact) filed in the past 12 months alone. Here is a summary of the most common complaints:
- Terrible Support - This is the number one complaint lodged against Square. Some Square merchants even go so far as to suggest that Square is a "scam" because of their appalling track record of processing funds that have been placed on hold. Square support indicates that they will respond to email inquiries within 24 hours. The time frame is sometimes closer to 2-3 days according to a slew of frustrated merchant reports.
- Issues with Deposits - Difficulty with inaccessible funds is a close second in the complaints department. Square's aggressive fraud prevention tactics have put many small businesses in a position where they can't access their income because their transactions have raised a general red flag for any number of reasons.
- Crashes and Bugs - The Square interface isn't perfect. Numerous Square merchants report that they regularly have to reboot after crashes. Other common issues include malfunctioning credit card swipes and occasional bugs.
Positive Reviews and Testimonials:
Square has been a really good POS solution for some business owners. Here's what happy merchants are saying:
- Accessibility - Square is literally accessible to almost anyone. This is a count in its favor even though there are some potentially risky trade offs for the easy access. Small business owners that lack startup capital or good credit will definitely be interested in Square's service.
- Good Design - The Square Register app is truly one of the best designed payment processing apps out there, especially with the recent addition of features geared towards the restaurant industry.
- Innovative - Square is one of the pack leaders in the point of sale industry and they don't appear to be slowing down anytime soon. Their innovative approach continues to develop services that are transforming the way that merchants and customers engage at the checkout counter and beyond.
I have a mixed feelings about Square. If I were a small business owner I would really do my homework before jumping on the Square bandwagon. Square clearly has some distinct advantages because of its sheer size and the groundbreaking developments available with Square Wallet and the Merchant Directory. The question is whether the benefits are worth the potential risks. I would personally be very hesitant to place my income in the hands of a company that has no phone number or direct line of communication. Would you deposit your money in a bank with no customer service representatives? Clearly Square is trying to keep their costs down by limiting support, but it seems a bit absurd for a company of this size to handle all inquiries through email and Twitter. Square's reputation for holding funds is another huge issue that shouldn't be taken lightly.
Square might be a good option for small businesses that have a low sales volume or sporadic sales. It's perfect for garage sales or small trade shows. It may also be a good solution for mobile businesses or individuals like massage therapists and independent consultants. Beyond that I'd recommend seriously investigating how Square stacks up against other POS systems out there. The cloud based POS market has expanded tremendously over the last five years, as has the mobile processing market, and Square has a lot of serious contenders from both recent startups and industry giants like PayPal.
Overall conclusion? Check Square out, but proceed with caution.