Intuit takes a swipe at Square by Michal Lev-Ram @FortuneMagazine January 10, 2011, 3:34 AM EST E-mail Tweet Facebook Google Plus Linkedin Share icons Intuit’s GoPayment is going freemium to battle Jack Dorsey’s Square, but is the mobile payment pie worth fighting over? The Intuit GoPayment reader Intuit, best known for its Quicken, QuickBooks and TurboTax accounting software, is making a big push into the burgeoning mobile payments business with the launch today of a free version of its nearly two-year-old GoPayment service. GoPayment, designed for small businesses that don’t yet accept credit cards — think babysitters, plumbers, dogwalkers and flea market vendors — aims to compete with Square, a mobile payments company launched in 2009 by Twitter co-founder Jack Dorsey. Fortune has learned that Intuit will begin promoting its new services through television ads and YouTube videos starting this week. “This will attract the smaller businesses that couldn’t take credit card payments before or are taking them but not getting enough value,” says Chris Hylen, general manager of Intuit’s payment solutions division. “It’s for people who are on the fence because they don’t want to pay a monthly minimum.” Like Square, Intuit’s GoPayment is a mobile app coupled with a magnetic stripe reader that attaches to smartphones. Both companies take a cut of each credit card payment that’s run through their readers. But up until now, Intuit also charged a $13 monthly fee for its service and its readers retailed for as much as $219 (Square’s stamp-sized readers, which fit into a phone’s audio jack, are less rugged but have been free since day one). The new offering not only does away with the monthly fee, it also includes a free, arc-shaped reader. Of course, free is never really free. The new flavor of GoPayment comes with higher discount rates—the cut that gets taken out of each credit card transaction and divvied up among Intuit, the credit card companies and banks. Instead of 1.7%, the new discount rate is 2.7% (which is still a teeny bit lower than Square’s rate, 2.75%). Update, 1/10/11, 5:40PM: Intuit’s new 2.7% discount rate does not apply to American Express transactions, which are charged a variable rate depending on the customer’s industry. Square has Dorsey, the co-founder and former CEO of Twitter, to thank for the fawning attention it’s received in the media. Intuit’s secret weapon is its history of serving small businesses. (QuickBooks, its popular accounting tool, has legions of devoted small business users, and Intuit naturally has an advantage at marketing to them.) But at least for now, Intuit’s offer comes with one glaring downside—an expiration date. To qualify for the free reader and free account, businesses must sign up by mid-February. Hylen assures the push for free is not “half-assed.” “We are committed to free,” he says. “This is just the first step, and we wanted to go big but allow some flexibility to adapt.” Making credit card payment simpler and cheaper is a win-win for small businesses, but just how much money is there to be made from processing relatively miniscule credit card payments via mobile phones? “Maybe there’s a reason why these types of businesses don’t already accept credit cards,” says Sean Harper, co-founder and CEO of FeeFighters, a comparison-shopping website for merchant accounts. “Maybe it’s because the incumbents [the banks who traditionally sell accounts and credit card terminals to businesses] have decided it’s not economical to market to them.” Lucky for Intuit, it will always have TurboTax to fall back on.