By Tom Waters and Ben Abel
Bank Associates Merchant Services
Square Inc. has a vision of revolutionizing the payments landscape. The company's motto: "Make commerce easy." In 2009, Square embarked on its mission to offer simplicity in a complex industry and open the market to a more mainstream audience. Spreading this paradigm began by implementing a simplified pricing model and simplicity in marketing in an industry rife with complexity. This strategy turned out to be a billion-dollar notion.
In May of 2013, Square reported 4.5 million active merchants that accounted for an annualized processing volume of $15 billion. Undoubtedly, these figures have grown in the last 10 months. Those figures, coupled with Square's publicly ambitious mission, suggest the company is certainly a player worth benchmarking.
As Square captures more market share in the payments industry, it is becoming more common for the average merchant level salesperson (MLS) to sell against Square's services. Since it is gaining attention with a slightly modified value proposition, which pitch or rebuttals would you use to contrast Square's services against yours? Would they be the same as those used against a traditional payment processor?
We asked members of The GS Online MLS Forum these very same questions. We sure stirred up some passionate responses.
The forum's responses to our question, "How do you sell against Square?" predominantly took to highlighting Square's lack of live service.
Steven Peisner said he responds to questions about Square by offering to come speak with the merchant in person, followed up by "[W]hile you are at it why don't you call the Square rep and have him attend the meeting as well - he can tell you all about Square and answer any questions you have."
Of course, Square does not have an outside sales force, so no rep would show up. This demonstrates a strong differentiator between a standard merchant account, where you have a dedicated account representative, and Square.
SalesAMS laid out a similar response, directing attention to Square's lack of customer support by saying, "Let's call Square right now and ask them about [your last transaction] just to see when it will hit your account! What? You don't have a 24/7 customer service phone number? � With us, you get � live domestic 24/7 customer support."
We all know most merchants think it is an extremely important feature to their payment acceptance account to have someone accessible to answer their questions or hear their concerns. This rebuttal does a great job of pointing out how Square does not offer that peace of mind.
In contrast, some forum members felt it was futile to fight against the tide as the lone sandbag holding ground against the flood. Instead, they chose to examine the demographics that Square bests fits and let Square play its role in that market.
There are two types of merchants who can typically benefit from Square's pricing model:
Steve Norell viewed Square as something of a blessing in disguise. "They handle all the merchants that we never wanted in the past because the only money you ever made was on the lease of a terminal," he said. "Since that revenue stream is gone, all you get from them is phone calls complaining about [monthly minimums], statement fees, PCI fees, and every other fee that we are either passing through or making money on."
We can all relate to the $500/month merchant who requires more constant attention than a toddler in a cactus store.
Clearent took a similar approach to Square's market base. "I see Square as a 'gateway drug' for payment processing," he wrote. "It gets people started, and if they grow to a point where they are a merchant that is viable enough to justify us signing them, then they easily see the value of going directly rather than through an aggregator."
With the knowledge that it may take time to develop a customer base, Square can help new merchants keep their costs streamlined while they build steam. No customers in month one? No problem! You pay nothing due to the lack of overhead. Couple hundred processed in month two? OK, starting to get some traction. Get up to $10,000 in month three? Great, now it might be time to have a conversation about working with a real MSP! No one wants to be playing on the JV team forever, right?
With Square's swiped rate of 2.75 percent on low tickets, this can come out to a lower cost than with standard MSP rates. If someone is processing a $10 ticket with a qualified rate of 1.59 percent and $0.15, this will come to an effective cost of 3.15 percent, a whole 0.40 percent higher than Square.
That doesn�t even account for any additional assessments levied by the card brands. As we know, with a low ticket the transaction fee is what really drives up that effective rate. And so, by eliminating it, Square becomes exceedingly attractive to the low-ticket merchant.
TPSS//Tiger summed this up well, stating that in general he had no issue competing against Square with the exception of one case: "The only merchants [of theirs] I cannot touch is the hotdog stands and so forth with average tickets $15 and below."
He appeared uninterested in getting those clients anyway though, due to the low profit required to give a worthwhile offer. We've always considered honesty a core value in being an effective salesperson, and sometimes telling a merchant that you're not the right fit for them can be a win-win for all parties involved.
Square is not going away. The startup has proven its value to a very niche demographic often considered less desirable by the average MLS. As a result, the company has built an industrious stronghold in mainstream brand recognition. We write this to alert, not to alarm. Through knowledge and examination we grow in strength and opportunity to solve, not sell.
In our next article, we will examine how Square is attempting to translate this success to a larger portion of the payment processing industry. 
Tom Waters has been dedicated to the merchant service sales profession since 2001. Currently, he is responsible for cultivating relationships with entrepreneurs in information technology, accounting, sales and marketing in his role as Sales Director of Bank Associates Merchant Services (www.bams.com). Using fresh and matter-of-fact training methods, Tom has contributed to the success of thousands of agents, affiliates and clients. He can be reached via email through t.waters@bams.com or via phone at 347-651-1065.
Ben Abel is Regional Director at Bank Associates Merchant Services. Since joining the team in 2006, he has risen through company ranks with a paradigm that his success was measured by the success of those around him. Ben is a dedicated, pioneering trainer whose methods of merchant services consultation have helped many agents expand their portfolios in terms of processing volume, deal count and profitability. He can be contacted at 347-866-9571 or ben@bams.com.
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