Square adds monthly service fee option

One big reason small merchants have helped build up Square is its transaction models, which was a more cost-effective options for companies unwilling to pay the exorbitant fees desired by giant financial services companies.

Now the company is taking further steps to make its mobile payments option more flexible for those that are starting to process more transactions: the company is adding a flat $275 monthly service fee to its payments structure.

Right now, most businesses using Square pay a small fee for every transaction, about 2.75 percent per swipe. If a merchant only handles a small amount of business per month, then the old structure of per-transaction fees makes sense. But it makes sense for anyone running more than $10,000 per month through the system.

“For 62 years, merchants have suffered complicated, expensive processing fees. Square is the first company to rethink electronic payment pricing with the merchant in mind. We are giving merchants affordable, predictable pricing, ” said Square CEO and co-founder Jack Dorsey. “With one monthly price, merchants know that the sales they’ve processed in a day is the same amount deposited in the bank.”

The new fee structure is good for businesses up to $250,000 per year.

Square can be used to accept payments from Visa, MasterCard, American Express and Discover; its Square Register solution adds the capability to track inventory and more detailed customer information.

Square got a big boost a couple of weeks ago when Starbucks announced a $25 million investment – and plans to use the system at more than 7,000 locations in the United States.

But the mobile payments shakeout has just begun. Personally, I'm keeping a very close eye on PayPal, because of its enormous penetration in the world of e-commerce.