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Square Inc., the flashy mobile-payments startup that now counts Starbucks Corp. as one of its merchants, announced a new flat-pricing plan Thursday that puts the company squarely into the ring with independent sales organizations and merchant acquirers competing for established small businesses. And Dunkin’ Donuts, a rival of Starbucks for business from coffee drinkers, has come out with a smart-phone app that, like Starbucks’s popular app, uses bar codes for transactions.
Under Square’s plan, a merchant generating up to $250,000 in annual charge volume can opt for a pricing plan that charges a straight $275 a month, with no additional fees. Square’s normal charge is 2.75% of the sale for swiped transactions on mobile devices that use its cube-shaped card reader.
The new plan wouldn’t make sense for merchants generating less than $10,000 a month in Square volume. But for merchants with annual volumes between $120,000 and the upper limit of $250,000, the plan offers lower expenses with each additional transaction, all the way down to 1.32% of the sale.
“One monthly fee and 0% processing is the first pricing option that gives small businesses a lower processing fee than bigger merchants,” the San Francisco-based company said in a news release. “Square is committed to offering prices that eliminate uncertainty and are lower than those traditionally only available for big businesses.”
Square’s merchant base of 2 million businesses and individuals includes many startups, micro-merchants, and part-time sellers that generate an average of only $4,000 to $5,000 a year in charge volume, according to Rick Oglesby, a senior analyst at Boston-based Aite Group LLC. Like the Starbucks deal and the Square Register product that converts Apple Inc.’s iPad into a snazzy point-of-sale terminal, Oglesby sees the new pricing plan as a tool to expand beyond those core merchants.
“I take it as a move to go up-market,” he says. “I think it is a move to get them more in with small to medium-sized merchants in the traditional space.”
Meanwhile, Dunkin’ Donuts says customers can now download an app for Apple’s iPhone and iPod touch and Android smart phones that lets them pay for purchases when the clerk scans a bar code on the phone. Like Starbucks, Dunkin’ Donuts’ mobile system is funded via a closed-loop prepaid card that can be reloaded through charges to a general-purpose payment card.
But a spokesperson for Dunkin’ Donuts’ parent company, Canton, Mass.-based Dunkin’ Brands Inc., notes that Dunkin’s app is different from that of Starbucks in that Dunkin’ Donuts offers a virtual prepaid account in addition to plastic prepaid cards. “With the Dunkin\' app you can add a plastic card or purchase a virtual card,” the spokesperson tells Digital Transactions News by e-mail. “You can’t purchase a virtual card (for yourself) via the Starbucks app, you can only add a plastic one.”
Dunkin’ Donuts also claims it is the only national coffee retailer that enables customers to send mobile gift cards to friends and family via all three channels of e-mail, text message, or the Facebook social network.
