After more than a week without the ability to process credit and debit card payments, Clara Paulson was forced to make a decision.
Paulson, who owns and operates Organica Herb & Tea Company in Old Colorado City, had used the same card processing company for years before her service was canceled with no warning and few options.
“I was in the middle of a transaction that day when the service just went down,” she said.
After exploring other options, including using mobile credit and debit card services offered by her local bank, Paulson decided to go with Square — something she had seen at other small businesses across the city, including new downtown coffee shop Wild Goose Meeting House. Instead of paying the $600 to upgrade software on the full point-of-sale outfit she already owned, she opted to purchase a $299 iPad 2 and pop it into the Square Stand ($99 on the company’s website).
Since launching its first line of merchant services in 2010, San Francisco-based Square Inc. has built a client base of 10,000 in the Colorado Springs area and has facilitated $75 million in card transactions since breaking into the local market, said Square representative Catherine Ferdon.
The firm’s two primary devices are the Square Reader (a small attachment that allows cards to be swiped via the audio jack of iPhone, Android and iPad devices) and the Square Stand (a device that turns an iPad into a fully functional POS system). Both products are compatible with the company’s three software offerings: Square Wallet, used for simple POS transactions; Square Market, for online purchases; and Square Cash, for email money transfers.
The company has also introduced Square Register, an expanded array that includes a cash drawer and receipt printer. All products can work together under the same merchant ID, no matter the device.
Card-processing giants like Square Inc. and widespread Intuit Inc. have saturated the local market — and most others — but that’s not to say they’re everyone’s best bet, or that local banks and merchant-service providers can’t compete.
Colorado Springs-based financial firms including ANB Bank and Platinum Relations have both fared well amid the colossal shift to more efficient card payment systems, according to company representatives.
“Intuit and Square are the two big [competitors] we have come up against,” said Daniel Foster, an ANB banking officer specializing in merchant services. “Now that the mobile devices are available, that is the direction a lot of small businesses are wanting to go.”
That’s why the company introduced its own mobile device in 2012, Foster said, in hopes of staying ahead of the curve. The company’s NPC Mobile Device, which was developed by Vantiv, connects to the audio jack of most smartphones (similar to the Square Reader) to become an on-the-go POS system.
“It keeps us competitive with what is on the market,” Foster said, adding that many commercial customers will first go to their personal banks in search of such services, rather than head straight for a third-party provider.
Another local financial firm (and BBB partner), Platinum Relations, released its own competing product last fall. The company’s ROAMpay G3x and ePNMobile Pro devices, as well as the MagTek Mini USB Card Reader offer similar services with local support, which is more important to some vendors.
“[But] I’ve seen a lot of businesses that want to stay doing business with the local banks — they don’t want that big-box feeling,” Foster said.
Like any other business decision, the choice to go with a merchant service provider is based on many things — finances, revenue, ease of use, traffic and more.
Chris Reynolds, a Platinum Relations business consultant and electronic processing expert, said the idea that Square is a better deal for every vendor is a common misconception.
Matt Barrett, CEO of the Better Business Bureau of Southern Colorado, said from his experience, vendors are looking primarily at cost-effectiveness: All of these merchant service companies provide varying means to the same end, which is to sell their goods and services as efficiently as possible.
“Merchant services has for a long time been viewed as a commodity, and as long as it is that way, I think the price is what people are looking for,” Barrett said.
Square’s standard pricing model includes a flat 2.75 percent rate for each swiped transaction, Wallet payment or market transaction. That rate jumps up to 3.5 percent plus 15 cents for each manually entered transaction.
Although this is considerably higher than some other processing services, Square nixes startup cancellation costs as well as other fees associated with more traditional providers. The decision to stay or switch should therefore be looked at on a case-by-base basis, Reynolds said.
For example, Reynolds said a customer who completes only a few transactions a month would be better off going with Square because of the lack of a monthly fee. Platinum charges a $20 monthly base fee, which he said makes less of a difference depending on how much business a company does each month.
Whereas many merchant service providers have “hidden” fees or complicated pay structures, companies like Square strip it down to a flat rate per transaction. Many customers prefer a per-transaction fee, Reynolds said.
“Our philosophy is if we can help that business grow, they make more money, we end up making more money and the community ends up benefiting from it,” he said of Platinum.
“It comes down to trying to minimize the amount of work that a merchant has to do dealing with merchant services … [and] to the ease of getting into it and the ease of getting out of it,” Reynolds said.
Another factor in that decision (to stay or switch) is that of equipment costs. While many companies require the vendor to purchase a computer POS system and pay for regular software upgrades, companies like Square are — for some — much more convenient.
There are very few overhead costs for Square, which will provide you with a mobile reader or iPad register essentially for free after the purchase of that hardware.
When all is said and done, Paulson said she will be paying about the same in merchant service fees, but without the likelihood of having to upgrade her system anytime soon. She can also use the iPad for separate uses, like playing music in her store, unlike most POS software that consumes the computer’s entire operating systems.
“No matter who you go with you are going to pay an average of 2.75 percent,” she said. “So that’s why we went with Square. It’s a system that works, and we can use the system for other things.”
Paulson said that Square also aligns with the store’s green initiatives. Square is paperless and energy-efficient, requiring only an iPad for full service.
“If people don’t want a receipt, they just don’t get one,” Paulson said, adding that she will save money in paper and thermal printing.
“To go paperless is simple — this machine makes it so easy. … We try to be green anyway, so this is a good step for us,” she said.