Your Local Coffee Shop Is Probably Going to Hike Prices Soon, Thanks to Square
The price of lattes and scones could at your favorite local coffee shop could get more expensive very soon — and the payment system Square is likely to deserve the blame for the price hikes.
By now, the financial services company Square’s stylish white stands have become as much of a staple at hip coffee shops as oat milk. Square launched a decade ago, and emerged as a hit with small businesses by helping them to process credit card payments. But a new change in Square’s fee structure might now cut into those same small businesses’s profit margins.
As reported by Eater, starting on November 1 for existing clients and right away for new ones, Square will charge merchants 2.6% plus 10 cents for each credit card transaction, instead of the 2.75% rate it has had since 2011.
Now, that might not sound like that big of a change. But 10 cents per transaction can add up for small businesses like coffee shops have a lot of small purchases over the course of a day. The coffee news website Sprudge pointed out that for a $5 cappuccino, Square used to take a cut of $.14. Under the new fee structure, though, Square's piece of the action would go up to $.23, “which is just under a 67% increase.”
Many coffee shops and other small businesses will try to avoid dramatic price increases. But at some point, the higher fees faced by small businesses will be passed along to customers. The takeaway is that you can expect the price of your latte at you local coffee shop to go up, hand in hand with Square's higher fees.
The fee change likely comes, as The Motley Fool notes, as a result of Square’s profit margin dropping to 1.06%, down from 1.08% in the second quarter of last year.