Also, don't believe the "Qualified Rate". Chase PaymentTech, for example, says their rate is 1.79% + 0.24. But, there's a big asterisk that the rate applies only to "qualified transactions". Reward cards, for example, aren't qualified, and in many niches, these will account for 30+% of transactions. While they do have their warts, the Stripe, Paypal, etc, don't have these tiers. The rate is what's shown...no tiers, no "qualified rates".

At least in the U.S., an "actual bank" doesn't offer a service that will process Visa (Debit+Credit), MC (Debit+Credit), AMEX, and Discover. You're paying for the aggregation into a single API, as well as a single business process for auth, chargebacks, etc. So, paying 2.2% + 0.30 works for me, and I can rationalize the slight upcharge.

Sorry, you lost me. I did read your reference. Yes, it mentions the variation, which is what cause me to do a little searching to see the earliest documented reference I could find with minimal effort. I'm clearly not the expert you are on attribution. However, as a layperson, crediting Paul Mellon for a minimally reworded version of a phrase doesn't seem much better than crediting someone who bothered to use it for a book title.

Attribution can be tricky. You seem pretty sure that the original statement should be attributed to Paul Mellon, and mention it's from January, 1942. What about this? http://news.google.com/newspapers?nid=1144&dat=19380705&id=ZysbAAAAIBAJ&sjid=BE0EAAAAIBAJ&pg=1516,6094461 It's the July 5th, 1938 edition of the Pittsburgh Post Gazette, specifically, a story entitled "Economics in Eight Words". The last line is "There ain't no such thing as free lunch". I assume that the difference of "There aint" vs "There's" and the missing "a" aren't terribly important. I have no idea if this is the first occurrence of it either.

Before the likes of Paypal, Square, etc, things were as you described. A small number of stodgy companies controlled most of the market share for merchant accounts. These companies exist because they saw that the needs of a large part of the market was being ignored.

This shouldn't be a big surprise...the flat rate plan was clearly a loss-leader meant to gain marketshare.

Most of the fee you pay to companies like Square doesn't go to them. It goes towards the "Interchange Fee" charged by Visa, MasterCard, and AMEX. These interchange fees vary based on card type (for example, fees are higher on "reward cards"...that's what funds the "reward"), and transaction type ("card not present", for example, has a higher rate). Check over the interchange fees for Visa and MasterCard, and you'll see that Square doesn't have a lot of room to move below 2.75% and still make money.

The three big players in this "mobile payments" space are Paypal Here (2.7%), Intuit's GoPayment (2.75% flat, or $12.95/M + 1.75%) or, the aforementioned Square (2.75%). At the moment, if you're swiping more than $1295/M, Intuit's $12.95+1.75% would be the best choice...unclear though, how long that plan will be around since it's a loss-leader as well.

The market that's more curious to me is the "card not present" market...payment processors for websites. Stripe seems to be the darling of the Slashdot crowd, but their pricing is horrible. They offer 2.9% + $0.30 per transaction, and won't offer to discount it until you're doing $1M+ per year. Contrast with Paypal's Payment Pro which drops down first to 2.5%+$0.30 once you hit $3k/month, then down to 2.2%+$0.30 once you hit $10k/month. Stripe has a few features that PPP doesn't, but they would need to be real important to you to pay that much more.