Face-Off: Square Vs. GoPayment

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Did you know that, paired with a smartphone and a mobile app, a small piece of hardware enables almost anyone to accept credit card payments? One such device is offered by Square, a disruptive young startup co-founded by Twitter creator Jack Dorsey. Another is from Intuit, a company whose financial software programs such as QuickBooks and Quicken are household names. Both of these options could be a potential boon for businesses, but which one is right for your company?

Square’s product is a small plastic dongle that attaches to a mobile device. It can instantly swipe cards and process transactions. There is no activation fee, no monthly fee, no gateway fee, and no termination fee. There’s also no contract to sign and no limit on the amount of money you can accept. Square is, however, a startup, which means hiccups along the way to a commercial launch. With GoPayment, Intuit offers a similar solution for businesses backed by a trustworthy brand name.

Both services are attractive to small business owners, as they eliminate the fees and equipment leases of traditional card-processing terminals. Because both products seem so similar in form, function, and operation, it’s easy to be confused about which one is the better fit for your specific needs. Here’s how the two services stack up.

What Is Square?

San Francisco-based Square was founded in February 2009, but it tested its products privately until November 2010, when it finally became available to the general public. Now anyone can sign up on Square’s website and request the Square reader dongle. The reader is free, and is automatically shipped to you after filling out an online form. You can also purchase the reader through the Apple Store online, and there are plans to bring the device to brick-and-mortar Mac Stores in the coming months.

At present, Square supports the iPhone (3G/3GS/4), iPod touch (second-gen and higher), all iPads, and select Android devices, including those from Dell, HTC, LG, and Samsung. The reader involves very little setup effort. Even the instructional card only lists three steps: 1) Plug in the reader, 2) Get paid and 3) Visit Squaredup.com to view reports and receipts. In practice, there’s a bit more to it than that, but not much.

Square requires three things of its users: a U.S. bank account, a physical U.S. address (not a P.O. box), and a Social Security number. Merchants can associate their tax ID number with a Square account, but that’s in addition to, not in place of, the SSN requirement. The only fee Square charges is for transactions. For swiped purchases (where the card is physically swiped through the dongle), the fee is 2.75 percent. For keyed-in transactions, the fee is 3.5 percent plus $0.15.

Square has come under some scrutiny for its security. In May 2010, misfired e-mails errantly informed Square customers that their accounts had been accessed. More recently, the company faced accusations from competitor Verifone, who claimed the card reader’s hardware contains a security flaw. These claims weren’t “fair or accurate,” retorted Dorsey, writing a defense of his company’s security practices on the Square company home page. Dorsey also noted that Square’s partner bank, JPMorgan Chase, stands behind every aspect of the service.

Despite such criticism, Square recently solidified its status as a major player in the mobile payments market when it received an investment from Visa at the end of April. Though neither company has revealed the amount of the investment, the backing of a giant in the credit card industry clearly represents great potential for growth. What’s more, following news of the Visa investment, Square announced that it will be adding on-device encryption to conform with Visa’s standards for mobile applications. (This means that the company will need to redesign its dongle.)

What Is Intuit GoPayment?

The GoPayment solution is similar to Square in that it also includes a device that attaches to a mobile phone to process payments. However, the small, entry-level hardware is only one of the options Intuit provides with its GoPayment service. The basic free reader for the cost-conscious merchant competes directly with Square’s offering, but Intuit also provides more options for established small businesses, including a reader that also functions as a receipt printer.

Like Square, GoPayment supports all iPhones and iPads in addition to select Android devices and BlackBerry phones. In total, GoPayment is compatible with more than 40 handsets, compared to Square’s 30-plus. A GoPayment smartphone application is provided for these devices, but a mobile web version is also available.

GoPayment ties in with Intuit’s QuickBooks Pro and Premier 2009, and QuickBooks 2010 for Mac and later versions. The GoPayment service is scalable up to 50 employees, and Intuit offers 24/7 live customer support.

The company offers a low-volume plan and a high-volume plan (for merchants processing more than $1,000 per month in transactions). With the high-volume plan, there’s a monthly service fee of $12.95 per month, but the low-volume plan is free. For swiped transactions, the rate is 2.7 percent (low-volume) or 1.7 percent (high-volume). For keyed-in transactions, the rate is 3.7 percent (low) or 2.7 percent (high). “Non-qualified” transactions—meaning those that don’t meet certain requirements of the Discover, MasterCard, and Visa network—will be subject to additional transactions charges ranging from 22 to 37 cents, depending on which plan you use. To make its pricing more competitive with Square, Intuit recently dropped its transaction fee of $0.15.

Testing Square

To try out Square’s service, we signed up for an account via the website. We were asked for our name, Social Security number, and how we would be using the service. We also had to specify if we were an individual or a specific type of business. The entire process took a couple of minutes.

After installing the mobile application and receiving our free Square in the mail (it usually takes three to seven days), we were ready to begin accepting payments. As long as we swiped quickly enough, we had no issues with cards not being read. After you enter in the amount of the purchase, there’s a handy option to add a note or a picture (either from the photo gallery on your device or from the camera) to accompany the transaction. After you press the Charge button at the top right, Square authorizes the charge.

On the following screen, the customer signs for the charge using his or her finger. It may not be the most elegant signature you’ve ever seen, but then again, neither are the ones scrawled on credit card slips. There is an option for a receipt, which can be sent either via text message or e-mail; or you can skip this screen. The final screen displays the transaction amount and a button that returns you to the initial input screen for the next customer.

Overall, Square’s mobile payment system was fast and easy to use. In fact, it was actually one of the simplest apps we’ve ever tried.

Testing GoPayment

Setting up your mobile phone or tablet for use with GoPayment is a bit more challenging than it is with Square. You first must choose which device is appropriate for your needs. Most small business owners will likely go for either the white plastic attachment that—like Square’s reader—fits into the headphone jack, or they’ll pick the Mophie brand case designed for the iPhone 4 (starting at $79.95, depending on where you buy). There are also a couple of options for Bluetooth cases, but these are not as heavily promoted. Once you’ve received your reader or case, you’ll need to download the GoPayment app from the iTunes App Store, Android Market, or BlackBerry App World.

You’ll also need to sign up for a GoPayment account, which can be done via the web, phone, or within the mobile app. Here, you’ll need to choose the appropriate pricing plan (as noted above, either low- or high-volume), and provide your information. Intuit’s form is longer than Square’s, and it’s customized for businesses, not individuals. You must fill out your business name, tax ID information, and your ownership type (sole proprietorship, partnership, LLC, corporation, or non-profit). There’s no option for an individual to use this service.

After filling out the online form, you have to wait for approval. This process generally takes about 15 minutes. Once approved, you can begin accepting credit card transactions.

Once your account has been approved, processing payments is simple enough. You swipe the card, and the mobile app captures the card information and presents it on-screen. Fill in the transaction amount and tap Charge to complete the transaction. While there is an optional Memo field to make a note about the sale, there is no option for adding a photo. Finally, again like Square, you have the option to e-mail or text a receipt to your customer.

Key Differences

The Transactions: Both companies accept American Express, Discover, MasterCard, and Visa, but Intuit also takes Diners Club and JCB cards. Square automatically initiates deposits within 24 hours of each transaction (on business days), and once initiated, that transaction may take a few business days to complete. On GoPayment, transactions are authorized in seconds, but it still takes funds two to three business days to be deposited into your account.

The Support: GoPayment offers live phone support 24 hours a day, seven days a week. Square has an online support site and Twitter support (@sqsupport) but no phone assistance. Square says it responds to e-mailed questions within 24 hours.

The Security: GoPayment is Payment Card Industry (PCI)-compliant, adheres to online banking industry protection standards, and uses an https connection over SSL (Secure Socket Layer) at 128-bit encryption in both the swiper and the application itself. This means that credit card data can never be stored on the phone. It’s as safe as processing with a credit card terminal.

Intuit also addresses potential fraud by requiring merchants to apply for an Intuit Merchant Services account to confirm their legitimacy before processing transactions. Once the account is approved, the app is password-protected.

Meanwhile, Square’s security practices are the cause of some controversy. John Kindervag, senior analyst in security and risk management at Forrester, had biting words for the budding company. “Square seems to be more concerned with style than security,” he said. “The payments industry is much more complex than they anticipated. Quite frankly, not everyone should have a right to take credit cards.”

IDC practice director on payments and security Aaron McPherson shares Kindervag’s skepticism. Although Square is PCI-compliant, he says this does not mean the service is secure.

“Heartland Payment Systems, one of the largest acquirers in the country, was PCI-compliant when they were breached, and tens of thousands of card records were stolen,” McPherson explained. “When the current standards were introduced, no one imagined that merchants might be attaching card readers to phones,” McPherson said. “I expect a future version of the standards will close this gap.”

However, now that Square will be adding hardware encryption on the reader itself, the company may be fixing those same security gaps that spurred this criticism in the first place. It remains to be seen just how much of an improvement we can expect following Square’s partnership with Visa, but all signs point to a security system more in line with Intuit’s.

Conclusion

After researching and testing Square and Intuit GoPayment, it’s clear that they are quite different. GoPayment is more targeted toward the small business owner, and it offers a wider range of equipment, plans, and support for that type of client. Meanwhile, Square is better suited for the individual who doesn’t require as many extra features. That simplicity makes Square easier to set up and use. In the end, no matter which company ends up being a better fit for your particular needs, you still have the benefit of accepting payments untethered from the credit card terminals of years past. All you need is a phone, an app, and—of course—a customer.

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3 comments
  • Mark Says:

    Umm, both JCB and Diners' Club *SHOULD* work on the Discover network, so either service would theoretically support them. Has anyone tried it?

  • Brad Michaels Says:

    There are other options available for business owners who are skeptical of Square and GoPayment.

  • Lucas Flaten Says:

    I think the final verdict should be to try both for yourself since both are free. However, I wish this review would have included more subjective info about the quality of the experience