The days when every business transaction took place at a cash register inside a retail location are long gone. Small business owners now can sell their products and services outside the walls of their stores and restaurants, in part because of an innovative mobile payment platform called Square.
How it works: Paying through the Square mobile terminal differs very little from the experience customers have when paying for products at a traditional cash register. Waiters, bartenders and retailers collecting payments for goods and services can swipe their customers' debit and credit cards with a special reader that plugs into any iPhone, iPad or Android device. Once a card is accepted, the customer can leave a tip and sign his or her name on the device's touch screen using a finger or stylus. An electronic receipt for the purchase is immediately generated and sent via text or email based on the customer's preference. This makes it easy for customers to keep track of receipts should they ever need to return an item or dispute a transaction.
Square in action: Square can be used by businesses in virtually any industry. However, merchants who sell products at nontraditional locations, like food carts, farmer's markets and craft fairs, are most likely to get use out of the mobile payment system. Small businesses that sign up for Square receive a 1-by-1-inch card reader for free. Setting up the program involves little more than installing Square's mobile application and then plugging the card reader into a recognized device. When it comes time for a customer to pay, merchants type in the amount they want to charge, swipe the customer's card and get an electronic signature on their mobile device. Each completed transaction is added to the merchant's total sales history, which can be viewed and searched by transaction description, credit card number or receipt ID at any time. Merchants can also issue refunds and resend receipts from within the mobile app.
Square can be used to accept Visa, MasterCard, Discover and American Express. The platform charges merchants a 2.75 percent fee each time a card is swiped. Manually entered transactions incur a special fee of 3.5 percent, plus an additional $0.15 per transaction. The funds from all Square transactions are automatically sent to the merchant's financial institution, and most are available for withdrawal on the next business day.
Why it works: Without a reliable Internet connection or point-of-sale checkout system, many small merchants find it impossible to accept any forms of payment beyond checks and cash. As a result, merchants end up losing out on valuable revenue, since people using credit cards spend between 12 and 18 percent more than when they use cash. It's not only mom-and-pop shops that are taking advantage of Square, either. Delivery people and salespeople who do business on the road are now using the app to accept credit card payment with zero hassle. What's even more important for many of the merchants using Square is the low cost. The 2.75 percent fee that Square charges per transaction is significantly lower than the 4 to 10 percent fee that competing merchant account providers generally charge.
Maximizing the benefits: In addition to its basic payment processing services, Square also has expanded its offerings by creating a loyalty platform that merchants can use. Merchants that take part in the Pay With Square mobile program can reward frequent customers and top spenders who make purchases through Square's mobile consumer app. Merchants can define the specific rewards they plan to give—offering things like 20-percent-off discounts to regulars who visit at least five times a month—as a way to reward their most loyal customers.
Read more "How It Works."
Stephanie Miles is an associate editor at Street Fight. She is based in Portland, Ore.
Photo credit: Courtesy Square