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Triangle vs. Square

So I’m sure you all know by now that I hate PayPal, I hate them a lot. Yesterday they unveiled their new product for mobile merchants: Triangle umm PayPal Here. I’m not buying into it for a number of reasons and yes, I’m about to pretty much tell you all of them.

First thing that was kind of funny to me was that they’re undercutting Square by .05%. What that means is that if you charge someone $100 you’ll be giving Square 5¢ more of your money. 5¢ out of $100 isn’t going to hurt me too much.

Second, the PayPal app looks like it was a complete reverse engineer of the Square app. The only difference between the two is that you have to enter the CVV number after swiping the card which you don’t have to do with Square.

People are talking about the 2.7% fee vs. the 2.75% fee of Square and then following it up with, but you get a free debit card that any money you charge someone is immediately available on the card which gives you 1% cash back making the effective rate 1.7%. While I’m good at math I’m not so good at bait and switch economics and something just didn’t sit right with me on this one until I saw a comment made by someone using the name SounderJunkie on The Verge that said:

Umm, the 2.7% is charged to the merchant, the 1% cash back goes to the customer using the card. The only way this becomes an effective rate of 1.7% is if you are charging your own card. Interestingly, this is classified under US law as money laundering.

Money laundering? Interesting idea. So they give you a debit card that accumulates your charges without the need for a bank account. As a freelancer I’ve run into times where I have to prove to a company that I was employed by showing them bank statements verifying PayPal or Square deposits to my bank. From what they’ve said so far they won’t be issuing bank statements for you and I can only suppose that they will show up on your PayPal account which looks more and more like a bank statement every time I have to look at one and at one time in the past they were acting like a bank encouraging you to keep your money in your PayPal account and earning interest on it through their Market Rate program or spend it with your PayPal debit card [something that when they got that started years ago I applied for, but never got.]

Third, PayPal is an established online payment juggernaut. They are virtually the only form of online payment that online businesses will accept. I just happened to check their site and noticed that they’re previous fee of 2.5% + 15¢ transaction fee has now been raised to 2.9% + 30¢ transaction fee. So in order to offset the extra .05% they’re giving you to undercut Square they now have to raise their rates for normal online PayPal exchanges unless you can get approved as a non-profit or make more than $3000/month. They also have some policies that are a very draconian in nature. They’re already telling book sellers that if they want to sell ebooks and accept PayPal payments they cannot sell erotica. Yet there is on eBay an ahem Adults only section where you can buy also sorts of erotica as well as some other rather bizarre sexually fueled devices and pay with PayPal and that’s OK because, well eBay owns PayPal and they love their monopoly status.

If you make a mistake and accept a payment for something they they don’t like you to sell [online raffles are a big one that people get hit with] they will suspend your account and hold all funds for 180 days and not even let you refund any payments. At the end of 180 days you can remove the money, but your account while still existing cannot be used because you have been banned for life. As a matter of fact anyone living at your address is also banned for life. If you sell your house and someone moves in that uses your old address they may end up being banned for life as well [in a call to PayPal that one caught them off guard, but they did say it could possibly happen].

 

Now Square, a San Francisco based start up that has been getting rave reviews since it’s beginning has also become pretty well established for mobile payments. Most of the food trucks around the Bay Area use Square. Small coffee shops and bakeries are using it. Sure there are a few other options around, but they usually charge more to process credit cards than Square does and the .05% lower rate for PayPal Here won’t help them overcome PayPal’s hatred by those who have used it in the past. I don’t think Jack Dorsey at Square will be quaking in his boots anytime soon.

If you want to get away from PayPal for online payments that don’t require a card swipe I suggest you check out Venmo. There are no fees associated with it unless you’re making a lot of money through it which in the future they say they will be instating fees for businesses to use it, but keep it free for individuals.