As Sellers Adopt EMV And Apple Pay, Square Pushes Its EMV/Contactless Reader

With chip cards and contactless mobile transactions gradually working their way into more merchant checkouts, Square Inc. is pairing a couple of tried-and-true offers to push an 18-month-old card reader that handles both EMV and Apple Pay.

In the latest wave of a promotional campaign that was announced in January, Square earlier this week dropped an undisclosed number of mailing pieces that promote its reader with a $20 discount off the device’s $49 list price. To promote Apple Pay, the piece also offers a maximum $350 processing credit for Apple Inc.’s mobile-payments service. At Square’s usual 2.75% transaction pricing, a merchant would have to process nearly $13,000 in Apple Pay volume to reach the $350 limit. The merchant has a year to reach the maximum credit, Square says.

Square has promoted hardware discounts before, and it may be hoping to drive up sales as more merchants accept EMV. “It’s really a good idea. I like the way they think and market,” says Adil Moussa, principal at Adil Consulting LLC, an acquiring consultancy in Omaha, Neb.

Since this latest reader was introduced in the fall of 2015 to go after both EMV and contactless transactions, the company has sold at least 1 million of the devices, estimates Rick Oglesby, who follows Square as principal at Mesa, Ariz.-based AZPayments Group. And there could be potential for much more. According to numbers released by Visa Inc. in March, just over 2 million U.S. merchants are accepting EMV, nearly double the number a year earlier.

To be sure, while both EMV and Apple Pay acceptance are expanding in the United States, they remain far from ubiquitous. Apple said in December that 35% of U.S. merchants—about 4 million locations—were accepting Apple Pay. But that number had grown from just 4% two years earlier.

At the same time, while a host of companies have entered the market Square holds a dominant position in mobile card readers. “Square is the clear leader,” says Oglesby.

But some observers caution that the company shouldn’t expect big results from this latest promotional gambit. One reason is that busy shopkeepers aren’t likely to spend much time poring over a mailer, they argue. As much as he admires Square’s marketing prowess, Moussa has his doubts. “I don’t think it will work,” he says. “It’s extremely hard to get people to move once they have something that works.” On top of that, he adds, “When we get those mailers, we throw about 80% in the trash can immediately.”

A more effective, albeit more expensive, approach would be a deeper subsidy on the device, Moussa says. The heavily discounted reader could then be offered to a segment of the merchant market that has a demonstrated tendency to spend on POS equipment. Some of the deeper discount might be recovered through lower chargeback costs, he says, since EMV acceptance shields merchants from liability for counterfeit card fraud. There may be a precedent of sorts for such an offer. When Square first announced the reader, it took pre-orders with the option of a $49 rebate.

All in all, the latest promotion, Moussa says, “sounds good and it’s clever, but in the end [Square] is just going to have to bite the bullet.”