Square Attempts to Quell Some of Amazon’s Thunder With Post Dispelling ‘Myths’

In a recent blog post, Square Inc. is attempting to counter some of the attention foisted on Amazon.com Inc. after the announcement last week of Local Register, the online retailer’s mobile point-of-sale service, by dispelling the “top 10 myths” about Square’s service.

Local Register enables retailers to accept payment card transactions using a smart phone or tablet and the Amazon Local Register app. Analysts view it as competing most directly against Square and PayPal Inc.

The services share a similar strategy: one price for swiped transactions and another for keyed-in payment card information regardless of card type; no contract; and low entry costs.

“Square is a victim of its own success,” says Adil Moussa, principal at Adil Consulting, an Omaha, Neb.-based firm. “It was able to carve itself a new category in the market: a solution for micro-merchants.”

That’s worked so well that others have difficulty dislodging Square from that position, he says. “But now, Square found itself stuck in that position,” Moussa says. “So trying to dispel the myths surrounding it is a way to reposition itself in the market.”

At the top of Square’s list is pricing. Square said it offers value for its 2.75% swipe fee by including inventory management, sales data, invoicing and an e-commerce service. Amazon’s fee for swiped transactions is 2.5%.

Other issues include security, that it is only for small business, its business strategy is struggling and that it has hidden fees. Square also tried to thwart the idea that it profits from transaction disputes by withholding merchant funds, it lacks business management tools, that its reader if less reliable than others and that Square only works on Apple Inc. devices.

Square did not respond to a Digital Transactions News inquiry.

Square’s argument may have some merit, Moussa says, particularly in regards to expenses and security. “The expenses and security issues are only issues because other players in the market are making them issues after they copied what Square did and are trying to contain Square in the micro-merchant category and stop their spread into other categories of small merchants: small, midsize and premium merchants,” he says.

In the five years since Square’s debut, the company’s marketing prowess is well established. “Everybody is trying to outsell Square, but I don’t think you can outsell Square” says Jay Parkin, marketing manager at Velocity Merchant Services, a Downers Grove, Ill.-based independent sales organization. “Square is good. We can’t compete with the marketing dollars [Square] has.”

For the artist occasionally selling artwork at a few events each summer, Square might be the right service, he says. Is that a business model that works for Square? Who knows, Parkin says. Velocity Merchant Services isn’t competing with Square for that particular merchant, he says.

Instead, the ISO seeks those with more sophisticated payment needs. It may seek the merchant with an average transaction value of $400 to $500, in one instance, he says.