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PayPal’s Square rival: high-end design, lower fees

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As I reported earlier this week, PayPal (s ebay) is preparing to launch a triangle-shaped mobile card reader similar to Square’s at a small business event Thursday in San Francisco. Bloomberg has added in some extra details about the device.

The credit card reader will be a blue triangle-shaped dongle designed by Yves Behar’s Fuseproject firm in San Francisco, said Bloomberg, citing two people with knowledge of PayPal’s plans. PayPal is expected to charge merchants a fee of 2.7 percent on transactions, undercutting Square’s existing 2.75 percent fee. It’s unclear if PayPal will charge a flat transaction fee on top of the 2.7 percent. Square did away with a flat transaction fee last year

The news, if true, suggests that PayPal is ready to compete hard against Square. Slicing a little more off the fees it charges merchants might entice some businesses to take a look though a bigger cut would be more appealing. The interesting shape is also a dig at Square’s device, which is obviously shaped like a square. And choosing Behar, a well known designer behind the Jawbone headset, is another sign of PayPal’s ambitions.

I’m told that PayPal is prepared to talk about a lot more than just a reader tomorrow so its plans for small businesses will be broad and not just focused on a device. That’s important because merchants need more than just an acceptance tool. They need ways to reach out to users, build loyalty and engagement with their customers and get better data on consumers, transactions and inventory. That’s where Square is trying to go with its new Square Register app.

If PayPal can tie the mobile card reader device back into the work it’s doing with its bigger in-store payment system, it can mean more location-based offers and better tools inside a store to engage users. We’ll have to see more on Thursday but this latest news confirms what we first reported. And it sets us up for a big showdown between online giant PayPal and the newest mobile payment darling Square, which is now processing $4 billion in transactions annually.

5 Responses to “PayPal’s Square rival: high-end design, lower fees”

  1. True. I WOULD NEVER leave SQUARE for the very SHADY PAYPAL. I guarantee that they find a way to HOLD FUNDS for 21 DAYS just like they do w/ their loyal EBay customers. PAYPAL can make your small business life a TOTAL MESS.

  2. robert montefusco

    i don’t think merchants are going to be flocking away to paypal for a mere .05%. the best feature of square is the one that paypal has lacked throughout its whole life. with square all transactions go straight tto merchant’s bank accounts instead of going into a paypal account. that to me is worth the 0.05%. paypal is not a bank, and even though it behaves like one, it does not follow bank regulations.

  3. Frank Tye

    How do you tie the wallet into the card reader? You could use bluetooth of course but 99% of iphone users don’t know how to set it up and there are always sync issues.

    No offense but you said earlier this week that Paypal was going to charge 1.99% which isn’t even close. Ryan’s sources are much better than yours!

    • Brian Roemmele

      Hi Frank,

      Good points. The Wallet is the consumer side of the proposition PayPal will offer. The merchant side is the Card Reader. The consumer can use the PayPal wallet at PayPal equipped merchants. This will be similar to the way it is used at Home Depot, in the PayPal deployment.

      And you are quite correct, Ryan is not only a great writer he is also a great journalist. He is usually spot on. My statement about the 1.99% rate is still on, however it was a guess. PayPal may set rates to merchants based on a number of variables. This may or may not be announced on 3/15/2012.

  4. Brian Roemmele

    Ryan, Great article as always! I think the other aspects of the PayPal Retail announcement for small and medium sized businesses will be just as important. I explored this in detail here:

    PayPal will intergrate the new Card Reader with the new Digital Wallet. Of course the consumer will not need to have the wallet to use the system. But the experience would be richer with these options:

    Grace Period – This separates the actual purchase from the payment by offering a 5-7 day grace period for consumers to change the underling Payment Card. This means that days after you leave a store you can shift a purchase to another Payment Card or divide it between other Payment Cards, Gift Cards, Loyalty Cards or a Bill Me Later loan.

    Installment Payments – Allows consumers to choose to create, ex post facto installment payments on larger purchases. This means that an emergency Refrigerator failure can be a less intrusive experience by allowing the consumer to divide the transaction in to multiple time payments.

    Personal Lists – Allow for system wide searches for particular products and allows for comparison of prices. The consumer can then create shopping lists based on the results of the searches driving customers into PayPal Retail merchants.

    Found Money – The PayPal Digital Wallet will locate customized deals, coupons and one time offers for items in a personal list. With consumer permission, once the customer is in a merchant location that accept PayPal’s solution, the merchant can target offers based on the shopping lists that the customer has created. This means situational offers can be made in real time.

    Spending Rules – This is a budgeting tool that creates specific fund “set asides” like travel funds and sets rules by purchase amount and ties specific Payment Cards to specific merchants. This allows for Payment Card “Air Mile” partnerships, like American Express has with Wholefoods Market to activate without a thought on the part of the customer.

    It will be interesting to see how this will change all players in the marketplace both startups and existing Payment Card Companies.