I’m building an Australian ordering platform. Our integration creates orders via the Orders API on our merchant partners’ accounts and records payment with source_id: EXTERNAL (payment is processed outside Square). The payments-pricing page says: “If you want to use the Square Orders API with a non-Square payments provider, there is a 1% fee per transaction”, and to contact Square for more.
Could someone clarify how this fee actually operates:
- Who is billed, the seller whose account the order is created on, or the developer/application account?
- Basis, 1% of the order total, or of the EXTERNAL payment amount?
- Does it currently apply to Australian sellers/developers?
- GST treatment, inclusive, or added on top?
- Mechanics, how and when is it charged (monthly invoice, statement line, deduction)? In production testing we see no per-transaction artefact: EXTERNAL payments carry no processing_fee element and nothing appears in payouts, so we can’t tell where or whether it’s being assessed.
We want to set partner expectations accurately before scaling. Thanks!
Hi there, thanks for the detailed question, happy to clarify how this works.
Who is billed: The 1% fee is billed to the developer (the application account), not to the sellers whose accounts the orders are created on. Your merchant partners won’t see this charge, the fee obligation sits with you as the platform integrating via the Orders API with a non-Square payments provider.
Basis: The fee is 1% of the total amount passed as the EXTERNAL payment, i.e., the amount you record via source_id: EXTERNAL, not the order total.
Mechanics: The fee accrues per transaction but isn’t collected in real time. Amounts owed accumulate against the developer account, and Square issues an invoice to the external partner once the accrued balance reaches a threshold (the specific threshold is not disclosed and subject to change). Timing can therefore vary depending on your volume.
Why you don’t see per-transaction artefacts: This is expected. Because the fee isn’t assessed against the seller or deducted from payment processing, you won’t see a processing_fee element on EXTERNAL payments or anything in payouts. There’s no per-transaction line item in the APIs. The assessment happens on Square’s side and surfaces via the invoice described above.
The key point for your planning: By recording payments as EXTERNAL, you are incurring 1% of those amounts as an owed balance, even though nothing is visible per-transaction in production. The absence of an artefact doesn’t mean the fee isn’t being assessed.
How to avoid the fee entirely: If you want to eliminate this fee exposure, the path is to use Square payments in your integration instead of an external provider. Orders paid through Square’s Payments API aren’t subject to the 1% Orders API fee, and your sellers get the benefit of unified reporting, payouts, and reconciliation in their Square accounts.