Paypal and Amex

American Express has always charged higher merchant interchange rates than Visa, MasterCard and Discover.  They justify these rates to merchants by claiming to have a higher end card holder base that spends more money with retailers and is, therefore, worth more to the retailer.

PayPal pioneered the simple blended interchange cost structure for merchant accounts.  The theory was that merchant fees were excessively complicated and unfriendly to merchants, with different rates for different categories of goods of services or different card types, etc.   PayPal took the merchant friendly route and offered merchants a simple to understand blended fee structure.  It is a much more merchant friendly form of pricing, hands down.

The problem with PayPal's simple blended average pricing for Amex was that it undercut Amex's pricing in the market.  It became cheaper to accept Amex through your PayPal account than it was to go direct to Amex.  This was obviously an issue for the Amex merchant sales team.  So. Amex went back to PayPal and required them to break Amex out of their blended pricing structure.  This was a multi year negotiation

 PayPal's marketing materials now have the following footnote on pricing: "2 This fee applies to Visa, MasterCard, and Discover transactions. American Express transaction fees are 3.5% + $0.00 USD EA.

 With respect to Square, they are positioned exactly like PayPal.  Their merchant friendly simple blended pricing for card present transactions is below what you would be charged directly from Amex.   It is reasonable to assume that Amex will ultimately go back to Square and take issue with their pricing model.

Timing is another thing, however.  PayPal didn't ultimately break out Amex pricing until they were at a total payment volume of >$50B / year.  So, Square likely has some time to figure this out.
Amex views PayPal not just as a high volume merchant, but as a channel to access small merchants, thus the conflict on pricing.

 although PayPal (and Square) process billions in volume making them appear as large merchants worthy of volume discounts, AmEx' view is likely that it's individual merchant volume that has to be taken into consideration when deciding on volume discounts. Very few PayPal merchants likely qualify for such discounts.
 AmEx is looking at Square earlier than they did at PayPal for two reasons: one, Square's rocket ship growth rate ($4B volume run rate) and two, their likely perception that PayPal and Square's 'bundled' rate impedes their ability to set pricing to the merchant and they'd like to get ahead of the ball before Square merchant expectations have hardened.

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