Block’s New Payments Push Takes Direct Aim at Credit Card Network Fees

Financial services provider and technology company Block is encouraging merchants to use its services ahead of the annual surge in spending that occurs over the holiday season.

The company is offering merchants a 1% rate for payment processing charges on all orders that users place via Block’s Cash App tool, according to a recent Bloomberg report.

For merchants, the offer from Block represents a steep discount over the fees they can encounter from card networks. Bloomberg reports that those institutions can charge up to 3% processing fees on a single transaction.

Block’s 1% charge on processing fees may not seem like a significant difference compared to what card networks can charge. But merchants that handle a large number of orders from customers may be able to realize heavy savings by pocketing a few extra percentage points in processing fees every time they ring up a sale.

Small discounts on processing charges for payments can lead to big savings over time for merchants.

Entrepreneur Jack Dorsey, who many people may know as an innovator in the social media space for his work in launching Twitter nearly 20 years ago, is Block’s CEO and Co-Founder. 

Dorsey has been bringing innovation to the payments space for more than a decade through Square and Block, and his latest move stands to please merchants that are looking for new ways to cut back on expenses related to payments.

“More and more sellers are getting frustrated with credit card fees for the value that they get back from it,” Dorsey said during a recent Square function in New York, Bloomberg reported.

Block’s move to make business easier, and more affordable, for merchants doesn’t end with helping them save on payment fees. The company is also putting merchants in position to extend rewards to shoppers.

Rewards continue to be a popular feature with many consumers in the U.S. A new study from the American Bankers Association reveals that 91% of people who own a credit card that offers rewards say they value the rewards program on their cards.

Block is offering a new product, Neighborhoods, that allows small businesses to offer rewards to shoppers. Block will help merchants pay for a portion of the rewards they offer through the product, according to Bloomberg.

Smaller merchants may not be able to offer loyalty programs that compete with those from companies with a large national presence, such as Starbucks or Panera Bread. But with an assist from Block, merchants can offer rewards that aim to entice more shoppers to buy goods and services from them.

A new solution from Block empowers merchants to accept Bitcoin payments from their customers.

“When we think about the sellers who we serve, it’s been this completely uneven playing field where you have this local coffee shop competing with Starbucks,” Owen Jennings, Business Lead at Block, told Bloomberg.

Block is also engaged in helping merchants accept more types of payments from their customers. 

For a limited time, merchants using Square Bitcoin can accept customer payments in Bitcoin without incurring any processing fees. Block is offering sellers solutions that help them manage their Bitcoin as well. 

The tools Square is building that focus on Bitcoin payments can help ensure that sellers never miss out on a sale, Miles Suter, Head of Bitcoin Product at Block, said in a press release detailing the new program.

“We’re making Bitcoin payments as seamless as card payments while giving small businesses access to financial management tools that, until now, have been exclusive to the largest corporations,” Suter said.