Some Merchants Start Pushing Back Against Toast, QR Ordering Rates

When a consumer is in your business you, as the proprietor, should be the beneficiary of a lower credit card processing rate, commonly called card present. This is because, in theory, an in-person transaction is more likely to be a real, local person and thus lowers the risk of fraud.

When a card is processed off-site, this incurs a card not present rate, which, if we’re following the above logic, incurs a higher rate because there’s an increased chance of fraud.

The rate difference is non-trivial, with the card not present rate often being 0.50% higher, or sometimes even more depending on card mix.

This is clearly a bit of a head scratcher when it comes to tableside ordering, or really any ordering happening inside your establishment, when you’re still being forced to pay a card not present rate.

“Wait: there’s a person in my shop. Shouldn’t I be the beneficiary of the card present rate?”

Logic says yes.

Payment bros say no.

But in a continual game of one-upsmanship, QR ordering companies (and POS companies with QR ordering capabilities) are charging even more for untethered ordering.

And some merchants are rightly starting to push back.

Let’s dissect a sample Toast merchant who was under this economic plan with Toast POS and their QR ordering tool, called Order & Pay.

Customers may be eligible to receive their first six (6) months of the Toast Order & Pay Module at no cost if they meet the below eligibility conditions (“6 months Order & Pay Promotion”). This Module is offered as a month-to-month subscription, billed on a monthly basis. Following the first six (6) months free of the Module, as applicable, the fee shall be the full quote price per month, plus any applicable per-transaction fees. The 6 months Order & Pay Promotion may not be redeemed for cash and may be available only in select markets. This promotion is a limited time offer subject to change. Toast reserves the right to suspend, modify, or cancel this promotional offer at any time.*

*All transactions through Toast Order & Pay are processed at the customer’s contracted card-not-present rate.

**The quote price includes up to $14,000 in monthly transaction volume through the Toast Order & Pay Module.

**Monthly transaction volume in excess of $14,000 will be subject to an additional fee of 0.5% per transaction (the “Additional Transaction Fee(s)“).

The Additional Transaction Fee(s) will be waived until March 31, 2021

**By selecting Submit, you represent and warrant that you have the authority to bind the Merchant legal entity listed above (“Merchant”). You expressly authorize Toast to charge $69.00/month per location, plus a 0.5 transaction fee to the payment method and on the current billing schedule Merchant uses for Toast software billing, beginning with your next billing cycle, and agree that your access to and use of the product listed herein is subject to the terms and conditions of Toast’s Merchant Agreement https://pos.toasttab.com/merchant-agreement, Terms of Service https://pos.toasttab.com/toast/terms-of-service, and Privacy Statement https://pos.toasttab.com/toast/privacy.

This particular merchant did the math and realized they’d be saving tens of thousands of dollars a year moving to a different provider.

No, that’s not a typo.

Tens of thousands of dollars a year in premium to use Toast’s QR tool.

Here’s the math.

This merchant’s current Toast Card Not-Present rate was 3.5% + 0.15. 

They we doing over $200,000 in monthly volume.

Their average check was $35.

$200,000 -> 5,715 checks.

5,715 checks * $0.15 per check = $857/mo.

The first $14,000 is billed at 3.5% -> $490/mo

The remaining $186,000 is billed at 4% -> $7,440/mo

Then there’s a SaaS cost of $69/mo

All-in, Toast’s bill for QR ordering on this merchant is $8,856 per month, or $106,272 per year.

We’d guess 35% of that is pure payments profit, meaning this merchant rationalized that they were handing Toast an additional $37,000 a year.

Gee, is your POS expensive enough yet?

Well, the merchant shopped card not present rates at Square and GoTab.

Square: $0/month & 2.9% of transaction + $0.30 per transaction

GoTab: $0/month & 2.49% of transaction + $0.25 per transaction

On Square the merchant would pay $7,515 per month or $90,180 per year, saving $16,092.

On GoTab the merchant would pay $6,409 per month or $76,908 per year, saving $29,364.

Logical person’s brain: Uh, can’t I buy a whole new POS system for between $16,000 and $29,000 a year?

Our answer: Uh, does a bear shit in the woods?

This merchant is the outlier because they cared to do something as crazy as to consider their bottom line, but just think about how much of an economic impediment payments processing is on humanity. What value is being created for all that extra cost?

NYU published an article about the drag (i.e. complete waste) of payments being something like 3% of global GDP.

That would be a staggering $2+ trillion a year spent on nothingness.

What if that money was put into something even more useless, like, we don’t know, fission, curing communicable diseases, or harvesting potable drinking water?

Can’t find the link to the NYU study but it’s not hard to see how they’ve arrived at their numbers looking at this QR bullshit.