Co-founded by billionaire Jack Dorsey, square, was the first to give people free mini card reader plug on a mobile device and accept credit and debit on the road. Square charm is in its simplicity, there are no hidden fees and you only pay a fixed rate of 2.75 per cent per hit or $275 per month and nothing happens.
Some big guns have tried to get in on this action. With similar models of flat rate, you can also use your phone or tablet to accept payments with a lot of imitators, such as PayPal here, Intuit GoPayment and PayAnywhere.
But now another company wants to be the digital cash: Punchey, a start-up in Boston that just came out of beta aims to small businesses that typically charge customers higher amounts of money. Since August Punchey has processed more than 50,000 payments by a total of $25 million to 500 companies.
How is it different
According to founder and CEO Nathaniel Stevens, Punchey is not trying to mimic the Plaza prices and instead uses a model of 'step' which takes real exchange rates established by Visa and Mastercard plus 75 per cent and $0.10 per blow of traders.
The company says that a typical $100 debit transaction would cost $1.24 with Punchey and $2.75 with square; a $100 Visa credit card pass would cost $2.41 with Punchey and $2.75 with square. Punchey is capable of undermining square in transactions of debit due to the Durbin Amendment to the Act of Frank Dodd which came into force at the end of 2011 that capped how much could charge banks for them.
So while the Plaza is paying a smaller amount of interchange fees to process debit cards, your rate flat does not differentiate between debit and credit, while the Punchey model reflects the lowest rates of exchange for debit transactions.
Even so, Stevens admits square is a good choice for companies that have a high volume of transactions of $ small and says Punchey is best for companies that often charge large quantities of money.
He says that while the Government top rate banks could charge, increased the amount fixed could charge - as much as $0.23 cents per transaction. So if you are selling an item of $1 a share from $0.23 is obviously too and in this case is actually eating some of the transaction costs by charging only 2.75 percent.
"As the dollar amount rises this flat fee is irrelevant," said Stevens, noting that the balance point where companies can save money with Punchey is an $18 debit card transaction and a transaction of credit card of $67. Essentially, cafeterias are going to want to stay with the square but lawyers, plumbing and automotive mechanic could save on costs of transaction with Punchey.
Hardware
Another thing that is different from the square is the cost of hardware. Punchey says that it is giving away that first 1,000 card readers of mobile device ordered after its beta launch on June 18; After that, they are $19.95. Hardware for PC or Mac - currently a signature and swiper - reader costs $199 in total. Stevens said a combination reader/swiper comes later this year. While the lack of a free card after some point reader can be seen friction by some, Punchey relies on other features to make up for it.
On the one hand, it aims to help brands with reputation management. For example, at the end of each transaction, you can send text or a receipt for a customer, as well as a request for review a customer asks how you met your needs. The goal is to get customers to praise or complain to you first, as opposed to the grandstanding on Yelp or your Google Local page. Depending on the type of feedback a client provides you could post on the Facebook page of your company or web site or respond directly to a satisfied customer.
"What we found is that traders are always looking for comments about things that they are going very well in their businesses and perhaps things are not going as well", says Stevens. "What we do is allow that traders take control of the conversation".
Is it enough?
The question is whether Punchey can make serious advances in the area dominated by the square of mobile payments. Plaza says it has more than 3 million individuals and companies on board and processes $15 billion in transactions a year, excluding the transactions of credit and debit charge of 7,000 Starbucks locations.
If his track record is any indication, Stevens certainly has the chops to try an ambitious goal. He co-founded and still remains a shareholder in Yodle, an eight-year-old New Yorker based on online marketing platform for SMEs that has 30,000 customers, 1,000 employees and revenues of $132 million a year. Yodle is on track to become the largest company to land always in the list of 30 in 30 Inc..
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