Overall I can't help shake the impression that this is kind of a "Yelp move": your core business model isn't that hot, so break the glass of the nearest hot business model and copy it. Yelp's done that with daily deals, checkins, etc.. This is Square doing a "GrubHub".

But, finally a product from Square with a fat profit margin (an extra 5.25%). I wonder if this is a sign of their future monetization strategy.

Their base processing fee of 2.75% + $0.00 is probably actually pretty low-margin for the particular "very small business" market they're targeting. There are big advertising costs, lower volumes per business and probably higher fraud rates.

And upmarket from that, medium-sized businesses are used to commodity processing fees closer to 2%. The whole "free reader/register" pitch is not as appealing there, where a higher processing fee would end up costing a lot more.

Maybe their strategy is to break even on the base processing to get mindshare and sell premium services like this. The challenge, as with all "Yelp moves", is that it makes you a follower not a leader.

(P.S. I don't mean to single out Yelp too much here.. plenty companies do it. I think they came to mind because they're also in the small business space.)