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With over 3,000,000 users, a network of about 250,000 merchants, and more than $10 billion in annual payment processing, Square (with its Square Register app) 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, PayAnywhere, and most recently Amazon.
Square has a shockingly simple setup process: create an account by providing some basic 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 swiper 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 and no monthly, making it a great solution for low-volume business or individuals who would find a traditional merchant account too pricey. They can do this because they act as a Payment Service Provider, which allows Square to put many merchants’ transactions through a single merchant account, thus significantly reducing expense, but can also lead to some problems we will discuss.
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, and their Square Stand elegantly transforms an iPad into a sleek point of sale station. These forward thinking developments along with several other creative software features are what Square has going for it. The bad news is that with such an enormous userbase, flaws become very obvious. A small company can hide its shortcomings. A company the size of Square cannot.
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, so you must use Square’s processing with the Square app. While Square’s anyone-can-accept-credit-card-payments philosophy seems great, it has some hidden costs. The main issue is that since Square aggregates merchants into shared accounts and doesn’t use preliminary credit checks or intensive merchant underwriting, the company 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. They also commonly terminate accounts they deem high-risk.
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.” The good news is that Square’s customer support has improved dramatically in the past year or so. The bad news is that customer support doesn’t really have the power to make these problems go away.
Square has the obvious draw of providing a moderately capable POS with payment processing services for $0 in monthly fees. But it comes with risk. My advice is that you should always prepare for he worst and hope for the best with Square. Your funds may be withheld for up to 90 days in the beginning, so make peace with that. If you can’t stomach this, then you may want to check out some of our higher rated mobile processors like Flint.
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.
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 and equipment sales. Rates and fees are:
- Monthly fee – $0
- Swiped card – 2.75%
- Keyed-in cards – 3.5% + $0.15
They don’t offer a separate rate for debit like Flint does, but Square basically established the industry standard here.
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:
Activation Early termination Interchange Chargebacks Cash payments Refunds 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.
One major concern I have here is the matter of processing limits. One reason that Flint can provide such predictable and reliable service is that – like any other standard merchant account provider – they make your per-transaction and per-week processing limits crystal clear. They also set up a protocol for you to increase these limits if needed. With Square, you are left guessing. There are no limits made explicit anywhere. This leads merchants to believe it’s okay to process large transactions, and then leaves them surprised when the transactions are held for three months.
Contract Length and Early Termination Fee:
Like most mobile, pay-as-you-go processing, Square has no early termination fee. 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. I would also like processing limits established and made explicit in order to prevent these holds.
Aside from that, however, I couldn’t ask for more from Square. All fees, rates, and important information appears 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.
Specific Industry and Size of Business:
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.
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.
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.
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 app 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 3,000,000 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).
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:
Square has really made a lot of headway in the support department. It was once impossible to get a representative on the phone, but now phone-based support is available for those who need it. Many will find that it’s not necessary, however, since Square has 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. 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 170,000 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).
- Phone Support - Like many businesses, this is offered on an as-needed basis. They will try to help you with via the support page first, but leave this option open. You will have to request a ticket number in order to get phone support on the line.
Negative Reviews and Complaints:
A quick Google search will produce way more feedback on Square then you could ever hope to read. They have an A rating with the BBB (improved from a B+ in early 2014) despite having 1164 complaints filed in the past three years as of this update, with about half of those (419, to be exact) filed in the past 12 months alone. That is a truly enormous quantity of negative feedback. Here is a summary of the most common complaints:
- Poor customer 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.
- Account stability issues/funding holds – Difficulty with inaccessible funds is a close second in the complaints department, and considering many of the support complaints are in reference to funding holds – this is probably the most important issue. 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.
More Information on Funding Holds:
Thanks to the hundred of complaints the BBB received from Square users, they were able to get a formal response from Square about why funding holds happen, and why communication seems to be lacking:
BBB’s business review for Square Inc was created in December 2010. A recent review of this company’s complaints was done in February 2014. Consumer complaints state that business owners complete a transaction using Square and receive an email to verify or provide additional information. The business owners do so yet their account is suspended and funds are not available for 90 days
In response to the above concerns, the company provided the following:
“When an account is suspended, merchants are notified that they have either ‘(a) violated the terms of this Agreement, any other agreement you have with Square, or Square’s policies, (b) pose an unacceptable credit or fraud risk to us, or (c) provide any false, incomplete, inaccurate, or misleading information or otherwise engage in fraudulent or illegal conduct.’
Due to security purposes, merchants are not informed which of the conditions they have violated.”
It’s kind of a cop-out excuse, saying that they can’t disclose any information to users for “security purposes.” It would go a long way toward satisfying merchant who are already in a crappy situation if Square could just tell them point-blank the reason for their account suspension and/or withheld funds. Instead, merchants are left frustrated and confused.
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 app- and infrastructure-wise. The question is whether the benefits are worth the potential risks.
Square’s reputation for holding funds is a 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. You may want to consider your other options for mobile processing.