Wednesday, May 26, 2021
The new ACH payment option is available through Square Invoices and can be used for business-to-business as well as consumer-to-business online payments. There's also a Square Web Payments software development kit. Square developed a tokenized check system that uses Plaid to allow customers to securely connect their bank accounts for bank payments, Plaid said in a statement.
Square said it will charge a 1 percent processing fee for ACH payments, dramatically undercutting its card processing fees. The company said it is also offering fee-free refunds on ACH payments.
"By offering ACH payments, we can help businesses process large transactions online at a low cost without worrying about bank authentication, compliance or any management payment complexities," said Dennis Jarosch, Square's head of payment platform.
During a recent beta test, Square observed that the average Square Invoices transaction was $3,500. It also said that a recent survey of sellers on the Square platform revealed that 28 percent of larger businesses are looking to accommodate large volumes of transactions as sales increase, and that 25 percent are looking for ways to reduce overhead. The partnership with Plaid aims to address these market demands, the company said.
One of the businesses testing Square Invoices was a plastic surgery clinic in Beverly Hills, Calif. "ACH payments are seamless to implement and use on Square Invoices, with everything being handled on the back-end, and also offers us the opportunity to save on fees, which is a huge bonus," said Renee Pickering, director of strategy at Dr. Daniel Barrett Plastic Surgery.
Square began as a mobile payment company focused on providing card acceptance services to small and micro-merchants. It has since expanded to offer software and hardware products, as well as business solutions, like loyalty programs, financing and marketing tools. In 2019, the company reported over $106 billion in gross payment volume. Between 2015 and 2020, the company reported, it experienced a combined annual growth rate of 50 percent in gross profit.
Plaid is a data aggregator that enables financial applications to easily connect with users' bank accounts for activities like checking balances and making payments. Last year, Visa, which has invested in Plaid, said it would acquire the fintech for about $5 billion, but that plan was scrapped after the U.S. Department of Justice sued to block the acquisition.
In March, Plaid launched a payroll verification product designed to make it easier for consumers to provide proof of income when applying for loans and leases.
Michael Epstein, chief of partnerships at Plaid and formerly one of Square's point men on partnerships, said that while ACH payments are cheaper than card payments from the merchant perspective, cards are perceived by consumers to be more convenient. He suggested the deal with Square makes ACH a simpler, more efficient payment choice for both parties.
The ACH is a store-and-forward payment network that connects all federally insured financial institutions. It is used primarily by businesses to "push" credits to consumer and business bank accounts. Think Direct Deposit of payroll and trade payments. The network also carries debits initiated by consumers (for example, online purchases) and businesses (for example, recurring bill payments).
Historically, it has taken one or more days to complete an ACH transaction. But recently, new clearing windows have been added to the network to support same-day payments for amounts up to $25,000. Unlike credit and debit card networks, which process payments 24/7/365, ACH processing shuts down on weekends and federal holidays.
"ACH payments on Square Invoices allows us to compete for and better serve complex businesses like wholesalers, home and repair, and service providers that need lower transaction costs, while giving businesses another option in how they accept payments that ultimately brings huge benefits to them and their customers," said Ashley Grech, global head of sales at Square
In addition, Epstein said, "For businesses that collect payments on high-value orders, the power of Square and Plaid means more certain collections."
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