Intuit Tweaks Its GoPayment Mobile Payment Service to Compete with Square

Intuit, the company behind the popular QuickBooks accounting service, was one of the first big software manufacturers to enter the mobile payments industry in a serious way and it is now raising the stakes, throwing down a direct challenge to Square, a media favorite created by Twitter’s co-founder, whose service is designed primarily for consumers and low-volume small businesses.

Intuit has just announced that by mid-February business owners will be offered the GoPayment mobile payments service “with a free credit card reader and no monthly service fees.”

This represents a big shift from Intuit’s earlier mobile payments strategy, displayed in its partnership with Mophie, a start-up that first became known as the maker of the popular JuicePack battery for iPhone.

When Mophie’s m-payment service was introduced in late summer last year, users had to pay $179.95 for the card reader and then $12.95 per month just to keep the account open. Moreover, the per-transaction portion of the fee — $0.30 – $$0.34 — was way too high, not least as compared to Square’s $0.15. As of the date of writing — 10 January 2011 — these are still Mophie’s rates.

GoPayment, however, looks uncannily like Square, especially its so-called “Low-Volume Plan.” The pricing is almost identical with Square’s, but slightly better. GoPayment’s “High-Volume Plan” offers a lower percentage, but a higher per-transaction fee and there is a monthly fee of $12.95; the plan is identical with Mophie’s.

Here is how GoPayment compares to Square and Mophie:

GoPayment says on its website that its High-Volume Plan is “ideal for businesses processing more than $1,000 per month,” so it is not clear whether users can select a plan or it is automatically assigned to them, based on transaction count. Moreover, it is far from clear whether the High-Volume Plan is any more advantageous than the lower-volume one, especially given that its per-transaction fee is twice as big as its lower-volume equivalent.

To illustrate this point, let’s see how these pricing plans compare in reality. Let’s assume that a business makes 1,000 sales a month, with an average transaction amount of $10. Let’s also assume that 75 percent of all transactions are swiped and 25 percent are keyed in. Then the processing fees will be as listed in the table below:

So in this scenario Square and GoPayment’s Low-Volume Plan are almost identical, with GoPayment’s High-Volume Plan and Mophie lagging behind.

Now let’s do the same exercise, where the transaction count remains 1,000, but this time the average transaction amount will be $50 and the total volume — $50,000. The figures will look like this:

This time GoPayment’s High-Volume Plan and Mophie lead the way and Square and GoPayment’s Low-Volume Plan lag behind.

What these calculations illustrate is actually something we already knew: Square is a service targeted at consumers, while Intuit’s offerings are targeting businesses. The weak point in Intuit’s strategy, and the reason why its Low-Volume Plan will not be able to compete with Square on an equal footing, is that, although it comes with “no long-term contracts, cancellation, gateway or set-up fees,” it still requires that applicant “businesses must be a new Intuit Merchant Service customer and approved for an Intuit merchant account.” In other words, consumers need not apply. So Square remains the consumer favorite, for all the reasons we’ve already discussed.

Image credit: Intuit GoPayment.