PayPal’s Square rival: high-end design, lower fees

As I reported earlier this week, PayPal (s ebay) is preparing to launch a triangle-shaped mobile card reader similar to Square’s at a small business event Thursday in San Francisco. Bloomberg has added in some extra details about the device.
The credit card reader will be a blue triangle-shaped dongle designed by Yves Behar’s Fuseproject firm in San Francisco, said Bloomberg, citing two people with knowledge of PayPal’s plans. PayPal is expected to charge merchants a fee of 2.7 percent on transactions, undercutting Square’s existing 2.75 percent fee. It’s unclear if PayPal will charge a flat transaction fee on top of the 2.7 percent. Square did away with a flat transaction fee last year
The news, if true, suggests that PayPal is ready to compete hard against Square. Slicing a little more off the fees it charges merchants might entice some businesses to take a look though a bigger cut would be more appealing. The interesting shape is also a dig at Square’s device, which is obviously shaped like a square. And choosing Behar, a well known designer behind the Jawbone headset, is another sign of PayPal’s ambitions.
I’m told that PayPal is prepared to talk about a lot more than just a reader tomorrow so its plans for small businesses will be broad and not just focused on a device. That’s important because merchants need more than just an acceptance tool. They need ways to reach out to users, build loyalty and engagement with their customers and get better data on consumers, transactions and inventory. That’s where Square is trying to go with its new Square Register app.
If PayPal can tie the mobile card reader device back into the work it’s doing with its bigger in-store payment system, it can mean more location-based offers and better tools inside a store to engage users. We’ll have to see more on Thursday but this latest news confirms what we first reported. And it sets us up for a big showdown between online giant PayPal and the newest mobile payment darling Square, which is now processing $4 billion in transactions annually.