Dive Brief:

• Square, which offers point-of-sale processing for merchants, is raising prices for some of its services, the company said Wednesday in a news release. Square is increasing the fee it charges merchants to instantly or same-day transfer funds to an external bank account, from 1.5% to 1.75% per transfer. Next-business-day transfers will remain free-of-charge, Square said.
• Square, a unit of parent company Block, also increased monthly prices for its online seller plans, upping its mid-tier plan from $26 to $29 per month when paid annually, and its high-end plan from $72 to $79 per month when billed on an annual basis.
• Additionally, Square will stop refunding merchants the processing fees it charges if those merchants process returns for their customers.

Dive Insight:

The price increases come as Square finds itself facing stiffer competition in the small business point-of-sale software market. Recent growth at rivals Toast and Fiserv’s Clover has outpaced that of Square, which has said it’s seeking to serve bigger merchants to fuel growth. 

Square had about 4 million clients as of the end of last year, according to Block’s most recent annual filing with the Securities and Exchange Commission. Food and drink businesses were responsible for the largest share of Square’s gross payment volume in 2022, at 31%, followed by retail at 19%.  

In the price increase notice, Square pointed out that merchants using its services in verticals such as restaurants and beauty and personal care don’t see a high volume of returns. For sellers that do, such as those in retail, the company said it’s “committed to providing support to help them adjust accordingly.”

With respect to ending the refunds for returns processing, Square said this in the release: “We are making this change to more accurately reflect that Square does not recoup in full processing fees from our network and payments partners in instances of refunds, and to match current industry standards.” Those processing charges can range from 2.6% plus 10 cents per transaction for card-present payments, to 3.5% plus 15 cents for card-not-present payments, according to Square’s website. 

The news release mentions Square offers sellers tips on crafting a return policy that “best suits their business,” or e-gift cards with no added processing fees if merchants opt to provide customers with store credit.

For current Square clients in the U.S., the refund change and price increase for transfers will go into effect on April 11, as will the new rates for online plans, the company said.

“Small pricing changes on small (percentage) take rates can mean big increases in revenue,” Baird Equity Research Analyst David Koning wrote in a Wednesday note to investor clients on Square’s price increases. The increases could add at least $60 million in annualized gross profit for Square, he said.

Executives at San Francisco-based Block said last week they expect the company’s peer-to-peer payments business unit Cash App to grow faster than Square. Square has seen slower growth of late, particularly in verticals such as retail and food and drink, which executives chalked up to macroeconomic headwinds. 

Although in line with other payments companies in the quarter, Square’s fourth-quarter gross payment volume growth — 14% year over year — was down compared to the third quarter.