Bank of America takes on Square

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The market for retail smart devices that enable payments has gotten crowded lately.

Everyone has seen the success that Square was having, and many have decided to get in on the act. Bank of America has added itself to the list of competitors, which include PayPal, Intuit, Groupon and a host of smaller companies. I've noted before that the bank faced some huge challenges to its Merchant Services unit. More generally, it (and other banks) faced the possibility that start-ups and other companies could develop technology that dilutes its brand, pushing to the background of emerging transaction processes.

Acknowledging the competitive threat, Bank of America has unveiled Mobile Pay on Demand, which will go live Dec. 3 and will focus this inchoate market to some extent on cost. The card reader service will charge merchants 2.7 percent of a swiped transaction, which compares with 2.75 percent for Square and 1.8 percent for Groupon (plus a 15 cent fee).

Bank of America will not charge a monthly or annual fee for the service. The bank hopes that its strong brand name with retailers will be a differentiator. The bank aims to be retailer-friendly, offering next-day access to funds and customer service representatives by phone.

"Additionally, retailers will be the merchant of record, meaning that the name of the business will appear on a consumer's credit card statement instead of Bank of America's or some other provider," notes All Things D.

I would add that the mobile app that comes with such services will likely be an even bigger differentiator. The payment apparatus itself is cool, but it is not enough. The bigger issue is how apps will enable cool, smartphone-based, location-based marketing that will drive more business. That's what retailers will eventually focus on, and where services have an opportunity to truly differentiate their offerings. Square ranks as the early leader and it has big momentum right now.  

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