When Square Inc. hit the marketplace in 2010, its innovative business model caught on quickly, shaking the traditional payments model. The company's free dongle, which attached to smartphones to accept payments, wasn't the first on the market. ROAM Data Inc. beat Square to that, but with its focus on micro merchants, flat-rate pricing and savvy marketing, Square became an industry game changer, propelling mobile payments forward, and almost instantly making many of the most advanced POS systems seem clunky.
Square's rise piqued the curiosity of merchants and industry players alike. Several competitors set out to implement even better systems, and many of these companies are still reaping the rewards of being early competitors in the mobile payments market.
Square's flat-rate pricing floored the industry and started a hubbub of chatter among payments veterans far and wide. On the surface, the one-size-fits-all transaction fee seemed unthinkable, especially to legacy sales organizations. Some predicted the unstable dynamics of the marketplace would become a barrier to Square's ability to sustain its simplistic pricing strategy.
At the time, one contributor to The Green Sheet, Steve Norell, wrote, "I would expect a company like Square to go bust sooner or later, or change its business model. As much as we all hope that happens, this outcome doesn't seem likely since Square continues to grow and Visa Inc., of all companies, has made a sizable investment in the company."
Fast forward to 2016, and while the industry has evolved, tens of thousands of micro merchants are still embracing Square's payments offering, and the company's pricing remains unchanged. Moreover, other companies – Stripe Inc. and PayPal Inc., for example – have also implemented single rate transaction plans for online merchants.
That said, while these disruptive business models have rattled, and even altered, the traditional payments model, long-established pricing strategies remain intact and continue to be widely employed throughout the industry. This indicates the marketplace supports both types of pricing and service models.
Indeed, with the payments industry being touted as one of the darlings of the burgeoning fintech industry, and more merchant services companies claiming their place on the annual Inc. 500 list of the fastest growing private U.S. companies, this would appear to be the case. In fact, alternative payment scenarios employing near field communication, blockchain and other technologies have elevated the prominence of the industry for businesses and consumers alike.
Other industry dynamics were also at play as these innovations were emerging. A more defined classification system of customer needs developed, which helped to create a service environment where providers could differentiate and merchants could more easily distinguish which providers best fit their needs.
Merchant Maverick, a review and ranking company dedicated to monitoring the payment processing and POS system sectors, recently published an article demonstrating this differentiation, stating, "Square is the frontrunner for businesses with less than $5,000 in credit card transactions a month. Once a user hits $10,000, though, merchant accounts become more affordable."
The article and its accompanying infographics demonstrate why this threshold is important for merchants who reach a $10,000 monthly processing level, and how they benefit from moving to a traditional merchant services pricing model. "Even with an interchange fee, an assessment fee, a processor mark-up, a transaction fee, and other monthly charges, merchant accounts still offer more for the money than Square, at least at a dollar-to-dollar comparison," the article stated.
Many merchants who sign with Square, PayPal, Stripe or another single rate provider will inevitably grow their operations over time. Suggesting the legacy payments ecosystem will naturally stay intact as these merchants mature into needing a more defined, sustainable pricing plan that is friendlier to the bottom line.
And, as new entrepreneurs enter the marketplace, they will inevitably always need an easy-to-implement, affordable payments solution that transitions them forward. 
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