Square and PayPal up rivalry with merchant expansion

Challenging PayPal

Payments services PayPal and Square are upping their rivalry by expanding their reach in the US as both firms attempt to solidify their position in the physical commerce market. eBay-owned PayPal has inked deals with 50 merchant acquirers through its payment processing partner, Discover, to enable its 55m users to pay in-store using their PayPal account through a number of different methods. Discover works with approximately 1,500 US retailers and is negotiating with them to accept PayPal in their stores, claiming that 2m US stores will be on board by the end of the year, up from 250,000 now. PayPal is also now adding mobile support for its payment identity service, PayPal Access, enabling retailers to accept consumers using their PayPal login details.

Square Focuses On Restaurants

The move comes as mobile plug-in reader Square continues its US push by expanding its offering to the restaurant industry with new features such as the ability to edit orders and kitchen tickets. Speaking to the Wall Street Journal, Square CEO Jack Dorsey believes the firm will quickly gain traction in the industry due to its competitive rates. Square now serves more than 3m merchants in the US and processes USD12bn in payments annually through its card-swiping device that plugs into an iPhone or iPad.

“If you’re a restaurant you’re paying over 3% at least. Most would pay, on an average transaction size of USD14, more than 4%. For us, every swipe is 2.75%. You get the money the next business day. It simplifies it – if you have to deal with this all the time you can’t think about expanding,” he says.

Driving Offline Commerce

Both firms are aiming to capitalise on the offline payments market, a space 10 times more lucrative than its online equivalent. While PayPal has its own mobile plug-in service, PayPal Here that competes more directly with Square, its latest merchant deals will see it integrated in some of the US’ largest retailers, such as Burger King and cosmetics retailer Sephora. The latest announcement follows a series of partnerships this year that will see PayPal accepted at a number of different merchants such as juice bars and petrol stations.

Meanwhile, Dorsey maintains that Square will focus on enabling smaller retailers to accept card payments, with the costs of more traditional card infrastructure making such a move prohibitive for many smaller merchants. There is certainly an opportunity for players attempting to marry mobile devices with physical retailers; Juniper Research forecasts that the use of mobile devices to power offline payments is set to soar, with transaction volumes set to top USD170bn globally by 2015. But PayPal and Square are going up against not just each other, but a host of rivals, from iZettle to Payleven, keen to get merchants using their mobile payment software.

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