Thursday , September 21, 2023

Square Drops Longstanding 2.75% POS Pricing for a Percentage-Plus-Fee Plan

Merchant processor Square Inc. on Nov. 1 will drop its longstanding 2.75% point-of-sale rate for a new pricing plan of 2.6% plus 10 cents.

Based on recent U.S. purchase dollar- and transaction-volume statistics from the bank card networks, Digital Transactions News calculates the new pricing plan will generate about 1% less for Square on the average card-present credit transaction but nearly 4% more on an average debit purchase. Debit now accounts for 66% of U.S. bank card purchase transactions.

The new pricing plan affects dipped, swiped and contactless purchases on the Square POS app. San Francisco-based Square announced the coming changes in a post on its Web site.

Since Square launched a decade ago, it has made transparent pricing a point of differentiation from other merchant acquirers, and the post gives an explanation to its sellers (merchants) about why the company is going from a straight percentage to a percentage-plus-fee model. The 2.75% rate dates back to Square’s earliest days.

“Like many payment-service providers and processors industrywide, we pay both fixed and variable fees to banks and credit card companies to process payments on your behalf,” the post says. “We’ve long had a fixed fee as part of the card-not-present rate (3.5% + 10¢ for manually keyed-in payments), but have not had a fixed fee in our card-present rate (2.75% for tapped, dipped, or swiped transactions). As a result, Square often incurs costs that exceed the 2.75% rate. The fixed fee of 10¢ helps to offset those costs, as well as allows us to reduce the standard variable processing rate to 2.6% per transaction.”

In an e-mail to Digital Transactions News, a Square spokesperson said “we are making this change to better align our rates with industrywide transaction costs. Our card-not-present pricing has always reflected this structure, and now our card-present pricing will as well. We are committed to continuing to deliver accessible, easy-to-use tools that help sellers of all sizes start, run, and grow their business.”

Based on Mastercard/Visa purchase transactions and dollar volumes for the second quarter, the average U.S. credit card sale is about $89. Thus, Square’s new price schedule will generate $2.414 in gross revenue on such a purchase, down 1.4% from $2.448 on a similar purchase under the old pricing. Revenue from the $40 average U.S. debit purchase will increase 3.6% to $1.14 from the previous $1.10.

The post lists a dozen services for which Square does not charge, including PCI compliance, refunds, and chargeback and dispute resolution services.

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