The battle for control of the payments market is moving into a new arena: point-of-sale services. PayPal, Square and Groupon are all launching new solutions aimed at getting both major retailers and small businesses using their services. For the winner, the prize is a slice of the credit and debit card industry, which processes more than USD3.6 trillion annually in the US alone. But what are the differences and which player has the best chance of success?
It’s already the dominant force in online payments, but PayPal is keen to translate that to the physical world. It already has a card-reader service that enables business to accept card payments using a mobile device, but its latest initiative takes this one step further. The ‘Cash For Registers’ programme aims to get local retailers to swap their “dusty old cash registers” for PayPal’s alternative, which includes a merchant app for iPad, an iPad stand, a printer and a cash drawer. Full details on the exact terms of the offer and pricing won’t be revealed until June, but the firm is waiving debit, credit, cheque and PayPal processing fees for the rest of 2013 up to a certain limit for anyone that switches, as well as offering free advertising in a bid to get merchants on board.
So what makes it stand out? PayPal believes its key differentiator is the fact that it isn’t driving hardware development itself, instead integrating with products from the likes of Erply, ShopKeep and Leaf. This means that rather than adopting a one-size-fits-all system, merchants are free to choose which product works best for them. That’s certainly a bonus, but it also complicates the process and is especially likely to leave small businesses unsure which option is right for them.
Square, on the other hand, is going all in on hardware. It has built a stand for the iPad that turns the device into a fully-fledged register. The ‘Square Stand’ features a card reader and when used in connection with the firm’s new software connects to other hardware including barcode scanners, printers and cash drawers. It’s a step forward from its previous service, which allowed merchants to use an iPad to accept card transactions using its dongle.
This marriage of software and hardware is what CEO Jack Dorsey believes will help Square to win out. “We wanted to build software and hardware that matches,” he says. And the ability to turn to Square for the solution to both those problems will undoubtedly help boost uptake. As will the cost. Square Stand costs USD299, with the firm taking 2.75% of all transactions. That’s compared to the between USD1,200 and USD1,500 PayPal estimates it will cost to update to its new system.
Groupon’s payment service is part of plans by the firm to expand from daily deals into a commerce service for local merchants. It already has a service for restaurants via its acquisition of Breadcrumbs last year and offered physical card plug-in to enable merchants to accept mobile payments. But now its bringing both those offerings under one service, called Breadcrumb, and bundling its service with physical hardware, enabling customers to buy iPad stands, cash drawers, a dongle, printers and/or an iPad.
With Groupon coming to the payments market relatively late it needs some big incentives to get merchants on board. Key among those is its aggressive pricing structure. The firm takes just 1.8% on swiped card transactions and is offering the first USD5,000 in payments processed for no fee to get new merchants on board. This focus on rates is a good idea, singling Groupon out from the range of other products on offer. Whether merchants buy into is another matter. Especially with Groupon struggling to shake off its poor reputation among merchants and those that lost out via its daily deals service.
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