All eyes have been on Square Inc. this month with its investment from Starbucks and its new pricing option, but Intuit Inc. says it still has an advantage in mobile payments that Square can't match.

Intuit is playing up its ability to link its GoPayment mobile card reader with its QuickBooks Point of Sale software. Switching to a rival's mobile-payment system is a more difficult decision when it means losing the QuickBooks connection, Brad Smith, Intuit's president and CEO, told analysts this week while discussing the company’s fiscal fourth-quarter earnings.

Intuit this past spring integrated QuickBooks Point of Sale 2013 with the GoPayment mobile card reader to enable sales on the floor while maintaining a connection to merchants' inventory systems. The earlier version of QuickBooks Point of Sale, called Version 10, didn’t interact with GoPayment. 

“We fundamentally believe we have a product that is unique enough and different enough that when someone is using our QuickBooks product and they use GoPayment, or vice versa, that gives us a differentiation versus others, and it's harder to replace that,” Smith said.

As such, Smith does not see margin compression occurring any time soon, despite efforts by rivals Square and LevelUp to push merchant card-acceptance costs closer to zero.

In July, SCVNGR's LevelUp dropped a 2% transaction fee it charged to make its money instead on a loyalty and incentive system it ties to its mobile-payments app. Last week, Square began offering flat-fee processing to small merchants, bringing their discount rate down to 0% per transaction if they pay $275 a month, with certain caveats. 

Regardless of such market pressures, Smith remains convinced Intuit can differentiate its GoPayment service enough through integration with QuickBooks to avoid cutting into margins.

QuickBooks online subscriptions grew 28% during the fiscal year ended July 31. And GoPayment helped to drive 13% growth for the year in merchant customers within the company’s Payment Solutions unit, Smith said, without providing specific numbers.

“It's not only a payments mechanism, it's a payment mechanism that flows seamlessly into your accounting product,” he said of GoPayment’s ties to QuickBooks. “It works seamlessly with your bank accounts, and it makes sure that your accountant and anyone else who's working with you as a small-business owner has access to all your transactions.”

Smith told investors he anticipates “very strong” performance both this year and next for the Payment Solutions unit.

“We're going to continue to learn where some other places in payments are that we can build a durable advantage,” he said. “But right now, everybody is enjoying great growth. I think small businesses are getting a great deal, and in terms of our margin compression and our switching costs, I think we've got a unique and differentiated product that allows us to compete effectively.”

Strong merchant growth helped Payment Solutions revenue to grow 31% for the quarter and 20% for the year, Neil Williams, Intuit's chief operating officer, said during the call. Adjustments in rates and fees made up the balance of the revenue growth, he said.

Williams did not discuss specific numbers, and the company’s earnings release did not break out performance by unit.

Todd Ablowitz, president of Double Diamond Group LLC, a Centennial, Colo.-based consultancy, agrees with Smith’s contention that combining GoPayment and QuickBooks is a market differentiator.

“Businesses want the payment [service] to integrate with the software of service they’re migrating to that solves all sorts of business problems,” he says. “To the extent that QuickBooks can be an important part of that end-to-end value proposition, they will be very successful.”

Companies most likely to succeed will create the best value proposition in what will be a highly “verticalized” market in that a dry cleaner will not need the same package that liquor store or restaurant or auto-repair shop will need. Ablowitz adds.

“This is really what going on in the background,” he says. “Anyone with an existing penetration has an advantage and a challenge.”

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