Square Leaves Easy Money on the Table
To say we are gung-ho about banking innovation is to speak in understatements. We’re ALL about banking innovation here. To wit, I was walking with a commercial banker in Manhattan yesterday whose company largely operates without branches. The banker points to a huge HSBC branch on Madison Avenue, and says, “Do you realize how much money HSBC needs to generate in order to justify that branch? It’s insane.”
I say, “Of course it is insane. I’m writing all the time about how that is insane.”
But I would argue that in the case of Square, it has hewed so closely to the innovation track that it is leaving significant money on the table, and could even be hindering its prospects.
My story begins with the merchant account of Bank Innovation. We’re a First Data/Authorize.net shop, and we decided to do the calculations on our merchant account, something that Jack Dorsey, Square’s founder, urges businesses to do more frequently. When we folded everything in — all the fees, charges, discount rates, our data entry habits — our total discount rate was something like 5.4% for Visa and MasterCard. It is an outrageous sum, particularly because we have largely automated our card processing through some cloud-based services since we signed up for the merchant account several years ago.
What to do? One of my colleagues recalled that Square allows manual entry of payments at a discount of 3.5% plus $0.15 per transaction. At that rate, it would cut our discount rate by about 35%. Sounds good, right? The problem is that we largely operate on BlackBerrys. Does Square allow for payments via desktop or via OSes other than the iPad or Android? Shockingly, no. You’ve got to figure that to create a desktop payment interface would take Square a handful of programming days. The whole Square service is so minimalist anyway that a desktop version following suit would require little design of information architecture. It’s a slam dunk. So why doesn’t Square offer it?
The short answer to that question is, who knows? We asked Square and the answer was basically, “because we don’t.”
Innovative channels are good, and I’ll take my lumps for not doing enough to transition Bank Innovation to the mobile way of life. But the fact is that we largely sit at desks and work, and I don’t see anything wrong with that. There are plenty of other such ventures, and for Square not to allow for that use case seems silly to me, particularly when that use case far eclipses, in terms of payment volume, the mobile use case. Look, when Square started its angling to do nothing more then stick its foot in the door. Well, it banged the door open. Serving this simple, desktop use case will mean a utility for the overall Square service that far eclipses its current mobile-only stance. If Square is going to play the payments game, it should play it to the max.
