A number of blogs pointed us today to news that mobile payment company Square is dropping the $.15 per transaction charge for any business using its mobile payments device and service. Square previously charged 2.75 percent of each transaction amount plus a flat $0.15 per transaction fee.
On the one hand, this is not that big of deal considering that the 2.75 percent is where the bulk of the company's revenue will eventually be made as higher-ticket purchases become more the norm. And, if you consider that 2.75 percent of $5 is $.13, the company will easily make more money through ubiquity than it will from a small transaction fee.
Considering the company's recent $27.5 million investment, there are definitely benefits to becoming the mobile payment standard bearer--a market which according to Yankee Group is estimated to see nearly $1 trillion in transaction value by 2014.
In spite of the tremendous growth, barriers remain. Most users are concerned about their privacy and potential for fraud, especially users in Asia, who despite, or perhaps because they are already doing things like making purchases and viewing bank statements, have a higher degree of concern.
The Square approach of attaching a dongle to a mobile device has proven to be interesting to U.S. merchants, but in many other regions, such as Japan, using a mobile phone to directly pay for vendor machines, train tickets, etc., is commonplace. Additionally, there are many developing nations that have jumped fully into mobile payments and lending via SMS.
The real winner in the mobile payment scenarios are the credit card companies who don't reduce their transaction fees in any way while themselves garnering a percentage of the transaction revenue. So, with the growth of mobile payment comes organic growth for credit cards companies.
Much has been made of Square as a game changer, and to a large degree it can be--at least for merchants. As to whether or not it will ever be a profitable is a different story, dependent on the growth of the size of the mobile transaction and customer willingness to trust their data to a third-party payment processor.
If you are interested in seeing if Square makes sense for your business, check out this handy calculator and comparison chart from Feefighters.com.