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Square Competition: BoA Enters Market

Square Competition: BoA Enters Market

Look out Square, Bank of America is launching its version of credit card and debit card swiping devices for smartphones. Its version, Mobile Pay on Demand, is being marketed through the massive bank’s Atlanta division and is calling it a “joint venture with First Data, Bank of America Merchant Services”.


It will look somewhat similar to what PayPal and Square have introduced and the bank is hoping to give the competition a run for its dongle-based money. It is a bank, after all and as its Merchant Services’ chief executive Tom Bell explains,

I don’t think you can get a loan from Square. I don’t believe Square will do your payroll. I don’t think Square will cash payroll checks for you.

He continues,

I don’t think they have any ATMs, nor do any of the others. This is really an extension of a very broad and deep set of services.

That’s true of Square, but PayPal might be another animal in its entirety.

It’s a free card reader and Bank of America hopes it will provide another tool that can be marketed to its business customers. It’s also provided around the clock support for its device. Even better, it’s going to be available the first of December.

A few of its other perks that Bank of America is offering its small business clients include fund availability the next day, lower pricing in many instances and these customers can also accept American Express cards with its service. There are also no monthly fees, no annual fees and no fees for setting up the process.

Easy Transition

It was an easy transition since its partner, First Data, has already developed its own card reader. The Bank of America payment dongle will work on BlackBerry, Android and iPhone devices. These services are considered high yield in the financial sector, so it’s a smart move for the banking giant. It’s already a bit late on the game anyway since other banks and companies have their own versions on the market – and they’re thriving. Indeed, this brings to consumers another convenience and another payment option for merchants, both traditional and digital.

You may recall earlier this summer, JPMorgan Chase partnered with GoPago of San Francisco and soon began providing its merchants with its Live system. It features a free Android tablet and card reader attachment. So far, Bank of America hasn’t thrown in a free tablet. But like the rest, the JPMorgan partnership come in late too since Square was already making its own rounds – and gaining a loyal following.

Not Impressed

Still, Bank of America Merchant Services’ Bell says none of that impresses him. He considers himself a bit of an expert in mobile commerce and says he’s been studying it “since its inception”. So the question then becomes, why doesn’t Bank of America simply partner with competitors that have already established their place in the market? Why create a new venture that simply facilitates transactions? He explained 300,000 customers and millions of locations dictates a new, different and better product than what’s currently available. He then said the bank had been giving the Mobile Pay on Demand a rigorous testing process for months and is confident it can deliver as promised.

He then explained that what is a “standalone system” today could easily transition into solutions for “more established merchants.” Payments, he said, are moving to clouds and the right services ensures an even smoother transition. “We are going to be right there in the middle of all that”, and said his bank’s card readers are an “improvement on some of its predecessors”.

The physical differences in its version are few. The dongle itself comes with small hook that can be attached to a key ring or the phone itself in many instances. The big difference, though, is the length of the device. It can catch the entire strip with the card is swiped, resulting in fewer instances of re-swipes. The clip that’s designed into the dongle keeps everything plugged in nicely, too. Bell says,

I think we will look at all kinds of different models as this evolves, obviously. This is our first step into the space.

Turns out, Bell just might be on to something. One analyst, when asked about Square’s potential, said,

What Square has done is they have opened up a new category of merchant: the micro merchant, the garage sale, the church festival, the one time selling opportunity,

says Philip J. Philliou, a payments consultant. He continued,

I think that will always be their niche. Do I think Square will grow to a dominant, more traditional merchant category? I think that will be more difficult for them, because merchant processing is a scale game and there are traditional competitors who are very well situated to continue to control that market.

But then he said he believes the big banks could find themselves in the role of being just another player in the game.

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