Can you elaborate? My understanding is that most merchant accounts are in the 2% + .45 range. Are you suggesting that merchant margins depend on a 1% margin?
2% can have a big impact. Many business have a gross margin of 20-30%. If you take Square's 2.75% from $100, that's $2.75 off a $20-30 gross margin – or 9.2% to 13.75% of the gross margin. That is a very large cost for a service seen as a commodity.
Square gets 2.75%. They pay their acquirer (I think Wells Fargo) Interchange+maybe a small fee. For example a swiped (card present) debit card purchase at a retail store is 0.80% + $0.15 (an example - this varies wildly). On $100 that's $0.95. They get $2.75. That's a 60% or so margin. It can also go down quite a bit depending on the type of card used which they really have no control over. For example it could drop to 20% on a corporate rewards card. I would say overall they probably have a very good margin.
Sure.
If your ASP is $6, then 2.75% is $0.165. This is to be compared to a merchant account for which the 2%+ 0.45 is $0.57. As you can see there is a huge difference.
The problem is that credit card processors (Visa, Mastercard...) are charging Square 0.1+1.5% or something which basically means that Square loses money on the transaction.
antr|12 years ago
us0r|12 years ago
Square gets 2.75%. They pay their acquirer (I think Wells Fargo) Interchange+maybe a small fee. For example a swiped (card present) debit card purchase at a retail store is 0.80% + $0.15 (an example - this varies wildly). On $100 that's $0.95. They get $2.75. That's a 60% or so margin. It can also go down quite a bit depending on the type of card used which they really have no control over. For example it could drop to 20% on a corporate rewards card. I would say overall they probably have a very good margin.
2pasc|12 years ago
http://www.cardfellow.com/blog/interchange-fee/