If you run a small business, you’ve likely heard of Square. They’re a popular payment processing solution, with some software products, but is Square really a POS system?
The world of point of sale systems and payment processors is confusing, regardless of how long you’ve been in business. With new solutions popping up day-in and day-out, it’s tough to stay on top of everything that’s happening in the industry. If you’re new to business, understanding whether you should use a cash register versus a point of sale system, and how a payment processor fits into the mix can make you want to quit before you even get started.
With all of the nuances involved, selecting the right point of sale (POS) system, or understanding how a specific product might work for your business can be difficult. In this article, we’re going to help you understand how Square works, and answer the question, “Is Square a POS system?”
What is Square?
Square got their start almost 10 years ago as a credit card processor. Their objective was to eliminate much of the complexity that exists within the credit card processing industry. In doing so, they would give more small business owners the ability to accept small credit cards than ever before.
In large part, Square has succeeded at this goal. They offer a straightforward credit card processing rate that’s very easy to understand and simple to sign up for. Then they pair it with a free hardware dongle that allows a merchant to accept credit card payments and payments from debit cards right on their smartphone.
This relatively simple combination of software and hardware makes Square a very attractive option for those who are brand new to the world of retail, food-service, and professional service. They’re also particularly popular with what are called “micro-merchants.”
A micro-merchant is someone that runs a business as more of a side project than a full-time occupation. For example, a quilter that sells his or her wares at a quilt show is a great example of a micro-merchant. These businesses are not accepting credit card payments or debit card payments on a day-in and day-out basis. Nor are they processing at a high volume. As a result, their needs are far different than a merchant who is trying to run a “real” business that provides a full-time income.
The above distinction between micro-merchants and full-time business owners is important because it helps to explain Square’s product development strategy, as well as exposes some of the flaws in their product offerings.
SEE ALSO: How is ShopKeep Different From Square?
Issues with Square
As we explained, Square is a great product if you’re very new to business or you’re a part-time micro-merchant that doesn’t need to accept payments day-to-day. However, if you fall outside of that bucket, you’re going to find yourself running up against some pretty significant limitations.
Expensive Payment Processing
For Square’s most popular product, the dongle that connects to your phone, the base processing rate is 2.75%. If you’re keying in transactions, called card-not-present transactions, that rate can increase to 3.5% + a $.15 transaction fee per transaction. If you only run a few transactions per month, that’s not necessarily a big deal. But if you do more than that, you can often save money by working with a different processor.
This is one of the biggest issues that full-time businesses will run into with Square. Their flat-rate processing model is great for promoting simplicity, but it’s cost-effective. That 2.75% or 3.5% + $.15 includes a lot of process markup, all of which is going into Square’s pocket.
All of the different payments you run (debit vs. credit, swiped vs. keyed-in, etc.) all have a different fee associated with them. These fees are set by the credit card companies, banks that are involved in the transaction process, and the processer or merchant services provider (MSP) you work with. Square bundles these fees into one or two flat rates.
The problem is that much of the time, these rates are higher than they would be if you paid each individually. For example, a debit card transaction might be 1.5% and with Square, you end up paying 2.75% for everything.
Square famously bills itself as free point of sale software. However, it only takes a few minutes to see that this just isn’t true. In fact, the only two situations where Square’s software is free are when you use their phone dongle on one device, or you use Square Terminal. In each case, Square is making all of their money off of the inflated processing rate we just discussed.
If you want to use Square for Retail, Square for Restaurants, or any of their other products, you’ll have to pay a monthly fee for the software associated with each. You will also need to buy the pos hardware (iPad, Square Stand, Square Register, etc.) for each pos terminal either upfront or in monthly installments.
Limited Customer Service
Since Square started for extremely small businesses, that don’t operate on a day-to-day basis, things like 24/7/365 customer support are not available. In fact, only Square for Restaurants qualifies for phone customer support that falls outside of 9 a.m. to 6 p.m. Monday through Friday.
That means if retail stores or quick-service restaurants run into issues on a Saturday, then your only option is to search their knowledge base, tweet at them (seriously…), or send them an email and hope you get a response in time.
Withholding of Funds
Square is able to make their credit card processing so convenient and simple to sign up for because they skip over the traditional underwriting process. If you’re unfamiliar, underwriting refers to the process of evaluating your credit score, financial history, and a variety of other factors to understand how trustworthy and financially stable you are.
Square essentially is willing to take on far more risk than most credit card processors. Because of this, they’re extremely sensitive to potentially fraudulent credit card activity. This specifically impacts small businesses because of the variability in their transaction volume.
If you only operate on the weekends, and then suddenly process hundreds of transactions over two days, there’s a high chance that Square will freeze your account and withhold access to your funds. This sudden increase in transactions looks like fraud when it’s actually a business doing what it is supposed to do: grow.
So, Is Square a POS System?
As we’ve tried to demonstrate, Square is first and foremost a payment processing provider designed for very small businesses. Everything else that they offer is an outgrowth from that core service.
The features that experienced merchants have come to expect in a dedicated POS system, just aren’t there or they’re severely lacking. Critical software tools for things like inventory management, employee management, and customer loyalty lack the features that full-time businesses need to be successful.
Even things like customer service are severely limited or missing altogether. When you’re looking to choose a tool that is directly responsible for your ability to make money, do you really want a POS solution that doesn’t offer customer service 24/7?
Plus, you’re locked into using Square’s payment processing, even if you can find a better deal out there. So, is Square a POS system? It tries to be, but it often ends up missing the mark entirely.
What is the Alternative?
Fortunately for small business owners, alternatives to Square that offer the features and service they need exist. ShopKeep was started by a small business owner just like you as a solution to the challenges that he was facing as a merchant. Issues like flawed and complex software, spotty customer service, and generally unreliable POS systems drove him to create a modern, reliable POS solution for small business owners.
Critical features like inventory management, employee management, reporting and analytics, as well as customer loyalty and customer marketing features are built to the exacting specifications of full-time business owners. Plus, ShopKeep works or a wide variety of business types. Whether you run a food truck, a clothing boutique or multiple quick-service restaurants, ShopKeep will work for your business.
In addition to these core features, ShopKeep seeks to stay on the cutting edge of small business technology by supporting things like contactless payments and a unique tool for business listings and customer reviews management called ShopKeep Spotlight. We’re also the only POS system to offer a mobile reporting app, called Shopkeep Pocket, which allows you to manage your business while you’re on the go.
Wrapping It Up
At the end of the Square is a great solution for simple businesses that don’t need much more than the ability to accept credit card transactions from time to time. They bill themselves as a fully-featured POS system that even offers free software in some cases. A simple look at what they truly offer reveals that this couldn’t be further from the truth.
If you’re running a full-time business or committed to growing your side project into one, we encourage you to consider ShopKeep. We understand the unique needs of small business owners better than anyone, and we have the tools to help your small business reach its full potential.