Over the last few years, the credit card processing industry has seen a new, simplistic form of merchant services grow at an exponential rate in a new company called, SquareUp.  While observing this new phenomena in our industry, we at The OGroup asked ourselves, "Is the SquareUp business model sustainable?" and, "Who is this right for?"

We actually do recommend SquareUp to some potential clients who come to us for help.  The SquareUp idea seems to be perfect for selling small ticket items and for vendors that sell infrequently, i.e. an egg vendor at a farmers market, a home made jewelry vendor at an arts festival, or even an ice cream truck.  We have found that the majority of businesses operating on any larger scale are experiencing ever systemic problems with the SquareUp model.  Here are the top 3 reasons why:

1. Pricing

As you may have seen advertised, SquareUp charges a flat rate of 2.75% on every transaction, when the card is actually swiped; 3.50% if the card is not present (an outrageous rate for you online vendors, or anyone taking transactions over the phone).  As previously stated, that 2.75% on small ticket items may not seem bad if you are facing a quick and impulsive crowd that is short on cash, but what if you're selling hundreds of cups of coffee (another small ticket item) a day, everyday, all year, and not just at sporadic events? That 2.75% starts to add up, and quickly.  This is where we see convenience take the place of competitiveness.  That convenience, which can be a plus, is really only found in the mobility and the virtually instantaneous start up of Square. For any serious business, waiting 1-3 days to sign up to accept credit card payments is no laborious matter, especially if it means getting your hard earned money deposited on time and decent customer service, not to mention getting a competitive rate.

The only other payment option with SquareUp is a flat monthly fee of... wait for it... $250 a month!  And if your business processes over $250K in a year you'll be paying the 2.75% or 3.50% on top of that!

2. Getting your money deposited

SquareUp is not a bank, they are an aggregator, meaning they are a middle man to a middle man.  They route your customers credit card information to a traditional merchant service provider, Paymentech, who then provides it to the major card issuers.  This aggregator position leaves SquareUp with a substantial lack of underwriting, making them very prone to holding their customer's money.  Swings in your companies growth, ticket sizes, or volumes of sales easily triggers the money-sensitive operation at SquareUp to hold deposits of their customers money for investigation.  The ability to allow anyone to instantly sign up with their program, without any credit or history checks, has allowed for a good deal of fraud to occur, forcing SquareUp to tighten security on the back end… the back end being the money going into your account for your goods and services.  If your money does get held, good luck getting a quick answer beacuse...

3. Customer Service

Imagine it's Friday, after a long week, your ready to go home.  You finish reconciling your books to find your account has been frozen due to suspicious activity.  What's the first thing you want and demand as a customer?  You want to talk with someone.  If you're processing with SquareUp, good luck, and buckle up, for a bumpy ride.  From what we can tell in reviews that we have read, customer service on the phone is virtually non-existent at SquareUp.  Their model necessitates you contact them via email.  They claim to respond within 24 hours, but again, from reviews online, many people post that they get see a response more along the lines of 3-7 business days.  When it comes to your money hanging in the balance, that is simply unacceptable.

In summation, if you need to accept credit cards en motion, randomly, throughout the year, SquareUp is probably going to work for you.  It can be a great tool if you don't want to pass up a sale because someone forget to bring enough cash to your event.  But if you run a permanent business that needs reliability in all facets of its existence we suspect that you may run into the same frustrations these other 500+ people have at the BBB.