PayPal Makes a Play for Small Businesses With ‘Here’

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Coutrtesy PayPal

PayPal, a division of EBay, is making a play at small merchants with the introduction of its new  “Here” device, which enables small businesses to accept both PayPal account numbers and major credit cards using nothing more than an iPhone application and the thumb-sized gadget.

The device, which will soon be available for iPads and Android phones as well, is an attempt to cut into the market now dominated by credit card processor Square. That company debuted a similar device in 2010, and reportedly has 100 1 million users.

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PayPal will charge merchants 2.7% of the transaction cost, slightly lower than Square’s current rate of 2.75%. PayPal hopes to eat into Square’s market share with this strategy, and with its ability to charge customers using PayPal account numbers.

Small merchants are eager to use these products due to the overly-complex system used by other companies to process credit card payments. A report in Fast Company explains that while other card processing companies sometimes offer a lower per-transaction fee than PayPal or Square, they charge monthly fees and high upfront costs to for credit card scanners. This tangled process has caused very few businesses with fewer than $100k in revenue to accept credit cards at all.

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PayPal’s entry into this new market is proof positive that there’s plenty of money to be made in this space, and that current credit card processing companies will have to treat merchants more fairly to keep their clients – large or small.