I'm going to attempt to answer you in the best way that I can, however, I would like to post a disclaimer: Credit Card processing is an incredibly shady/grey business with several companies fighting for a fraction of a basis point per transactions.
The big 4, as you put it, have very little to do with the actual processing of credit cards. They are the "finish" line of a consumers transaction. In between a consumer and the credit card company, there will be a terminal/pos vendor, a data vendor, a gateway, and a processor. Every single one of those folks takes a cut. In addition, all of those companies are part of larger conglomerates.
So, if you go to your favorite burger/salad/sushi/coffee place, their system will take your credit card, will have another company (like Datawire) create a secure connection to a gateway (lets say First Data) and then hand it off to the processor (BAMS), who will then process your credit cards but not fund them. Once the batch is processed, then the credit card companies will fund your account.
So Square is trying to "disrupt" this business, and create their own connection. However, it's not in AMEX/VISA/MC/Discover's best interests to deal with them. In addition, BAMS (Bank of America Merchant Services), Payment Tech (Chase), and AMEX run processors as a subsidiary, and then gateways (First Data) are parts of their conglomerate. First Data is part of BAMS, WorldPay is joined NCR/VISA/MC and VisaWorld is Visa/MC/Discover.
This is outside the "large" players like Heartland that process a tremendous amount of information.
Square is successful because the "pie" is huge, and growing every day. More and more people are using mobile payment and plastic vs Cash. With increased competition, basis points are king. ONE basis points on 3,000,000,000 in transactions is only 300,000. So for a company to bring in 1,000,000 they would have to essentially process a trillion dollars based on a single basis point commission.
I can go on and on about this giving you exact figures and numbers but I hope I've earned enough "trust" for you to believe me that sometimes letting go of 17% of your total revenue will actually bring you more cash.
Think of it like a bar that fired the bartender who gave away all those drinks. Yes, less people and less money in the drawer but more profit =D
The big 4, as you put it, have very little to do with the actual processing of credit cards. They are the "finish" line of a consumers transaction. In between a consumer and the credit card company, there will be a terminal/pos vendor, a data vendor, a gateway, and a processor. Every single one of those folks takes a cut. In addition, all of those companies are part of larger conglomerates.
So, if you go to your favorite burger/salad/sushi/coffee place, their system will take your credit card, will have another company (like Datawire) create a secure connection to a gateway (lets say First Data) and then hand it off to the processor (BAMS), who will then process your credit cards but not fund them. Once the batch is processed, then the credit card companies will fund your account.
So Square is trying to "disrupt" this business, and create their own connection. However, it's not in AMEX/VISA/MC/Discover's best interests to deal with them. In addition, BAMS (Bank of America Merchant Services), Payment Tech (Chase), and AMEX run processors as a subsidiary, and then gateways (First Data) are parts of their conglomerate. First Data is part of BAMS, WorldPay is joined NCR/VISA/MC and VisaWorld is Visa/MC/Discover.
This is outside the "large" players like Heartland that process a tremendous amount of information.
Square is successful because the "pie" is huge, and growing every day. More and more people are using mobile payment and plastic vs Cash. With increased competition, basis points are king. ONE basis points on 3,000,000,000 in transactions is only 300,000. So for a company to bring in 1,000,000 they would have to essentially process a trillion dollars based on a single basis point commission.
I can go on and on about this giving you exact figures and numbers but I hope I've earned enough "trust" for you to believe me that sometimes letting go of 17% of your total revenue will actually bring you more cash.
Think of it like a bar that fired the bartender who gave away all those drinks. Yes, less people and less money in the drawer but more profit =D