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Alternative Payment Systems, Part 5: Square and Intuit GoPayment

July 11, 2011

This is the fifth installment of my multi-part series comparing alternative payment systems to the PayPal X Platform and each other. Part one introduced Amazon’s Flexible Payments Service, part two discussed Facebook Credits, part three focused on Google Checkout, and part four examined Dwolla.

This time we’re going to consider two leading mobile card reader options, solutions from Square (@square) and Intuit (via their GoPayment system, @gopayment). We’ll look at what both solutions provide from merchant and consumer perspectives, where to go to learn more about each, and how they compare with the PayPal X Platform and solutions including PayPal’s recently purchased FigCard.

Mobile payment options

The mobile wallet is on fire lately. Though everyone involved in payments seems to agree that paying with mobile phones and tablets is on the rise, they each seem to have their own spin on what solutions will win out in the long run. Before we dive into the specifics of the mobile card reader approach taken by Square and Intuit, let’s do a very quick review of the space so you can see where card readers fit in overall.

As I wrote in a January 2011 blog post on “Credit cards versus the mobile wallet“, credit cards and cash rule the offline payments world for now. Today’s businesses must accept these more traditional methods of payment while they consider and explore additional mobile payment options. But traditional card readers are tied to a given location via landline connections, require dedicated lines, and are simply not amenable to svelte, mobilized businesses.

Square and Intuit understand the opportunity in these problems. They are targeting the sweat spot of merchants that need to accept credit cards in a flexible, handheld, take-em-where-you-got-em way right now. They do this by providing merchants with free card readers that attach to popular mobile phones and tablets. These mobile devices are the brains of the system; payments are processed using on-device apps and transmitted using the wireless data access built into the device itself. Physical location is irrelevant as long as a data connection is available. This gives merchants the flexibility to accept traditional credit card payments wherever and whenever they want for simple to understand fees. More details on Square’s and Intuit’s implementations below.

What other options exist? PayPal is supporting a number of avenues for mobile payments both online (e.g. Mobile Express Checkout, or MEC, for any web browser enabled device and Mobile Payments Libraries native apps for iPhone and Android devices in particular) and off (from old school SMS based payments to Square and Intuit competition from their very smart purchase of FigCard). Since PayPal enables funding of your account via bank transfers and credit cards, you have cash and credit options through their system. And you have other players preparing to launch physical solutions including Google (heavily in the NFC-based mobile wallet camp), Isis (also built on NFC technology), and (another credit card oriented solution; they “scan” card data via image capture rather than a mobile reader).

While it’s still unclear which online and/or NFC-based “wallet” may dominate in the future, it is clear that credit cards aren’t going away anytime soon. So no matter which other mobile payment solutions one considers adopting, most businesses do still need a credit card processing capacity, thus ensuring customers for the likes of Square and Intuit for quite some time to come.

Getting started with Square and Intuit GoPayment

Square has a straightforward homepage that immediately gets to the heart of the matter: Signing up to get a free card reader and starting to accept credit cards couldn’t be simpler.

The Square site also provides videos showing examples of their systems’ use as well as more information on Square’s related Register (turns an iPad into a card processing, receipt sending, and report crunching terminal all rolled into one) and Card Case (billed as “the friendly neighborhood way to pay”, this feature is meant to drive customer loyalty by enabling them to pay with a tab, find local deals, browse current menus and daily specials, and store digital receipts) applications. Square is clearly swinging for the fences when they claim they are for “everyone” (no business is too small or too mobile).

Key Square features:

  • Free credit card reader – plugs into audio port on Android, iPhone, iPad, and iPod Touch devices
  • Transparent pricing – 2.75% per swipe fee for all credit cards (Visa, MasterCard, American Express, and Discover); 3.5% + $0.15 per keyed in transaction
  • Next-day payout – funds are automatically paid out to your bank account daily

You can learn more about Square’s distribution channels and strategy in my related blog post “Who will corner the market on mobile card readers?“.

Similarly Intuit’s GoPayment site is structured around extreme simplicity and low cost.

GoPayment’s features are also clearly designed to make sense for just about anybody interested in accepting credit cards via mobile device:

  • Free card reader option – works with Android, iOS, and Blackberry devices (they also offer a combination card reader and receipt printer device for a fee)
  • Two tier pricing – 2.70% per swipe and 3.70% for keyed transactions (same set of card accepted as Square above) on the no-monthly-charge “Low-Volume Plan”; 1.70% per swipe, 2.70% per keyed on the $12.95/month “High-Volume Plan”
  • 2-3 days for payout – funds paid into your bank account

So both Square and Intuit intend for their mobile payment systems to be easy and (relatively) inexpensive for any medium or large business. And maybe for a lot of small fries like me, too!

Click here to read the complete article on the PayPal X Developer Network including comparisons of Square and Intuit GoPayment to PayPal offerings.

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