Order an merchant account with your Grande latte

On January 3, 2013,  Starbucks announced that it will start selling Square readers at 700 of their US locations for the price of 10 dollars.  Buyers will then get a 10 rebate union activating their account essentially making the reader free.

An unprecedented move for the coffee house that may prove to make a lot of sense if you think about it a bit.  Remember they did invest 25 million in the start up company and this undoubtedly shows their support for the company.  But think about the number of small merchants and entrepreneurs that spend their days at the coffee shop running meetings and closing deals.  This new product could actually fit the Starbucks line of business quite nicely.

This is expected to be the first of many new announcements coming this year along the lines of innovative merchant accounts.  Tradition acquirers who may have scoffed at the likes of companies like Square and such, should take another look at this new line of competition in the market.  There is an untapped market of small to mid size merchants available who currently do not require the need for a full size terminal that cannot be mobile to carry around.  And it’s the small companies like Square who make it easy for these small merchants to get online with credit processing.

That being said, the small merchant needs to pay attention to the fees these companies charge.  Typically, you’re looking at a set up fee (which appears like it can be waived in the form of a rebate) and then discount rates of approximately 2.65% for every transaction.  This is reasonable if the merchant processes less than 15 transactions a month but once you start processing more transactions, the cost can start to be prohibitive.  But as a startup… Not a bad way to go.

Square is slowly making in grounds here in Canada but there are a few major stumbling blocks in its way.  The first is their inability to accept Interac, the country’s domestic debit card.  Interac transactions currently take up 55 % of all card transactions in the of country however require that a terminal have a chip and pin reader in order for the cardholder to insert their card and to key in their pin.  This could be avoided if the reader were to be certified with contactless capabilities and from what I understand, this is currently being explored.  However, contactless transactions have limits inplace, so if a transaction exceeds the limit, a terminal will still be required.  The other road block is that Canada is almost completely EMV enabled and the liability shifts are in place.  So even if a merchant decides that he does not need to accept Interac and will only process credit card via mags wipe, he needs to be prepared to accept the liability for any chargebacks.

But it’s clear to see now where the market is heading and I think we can expect to see some exciting developments come from the major players this year.

About Admin

Matthew Hunt has been helping small businesses get set-up with Canadian Merchant Account Services since 2007 and helped 1000's do so. Join Matthew on Google+.


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