This is why we started FeeFighters. We owned small businesses and were tired of the bullshit. That being said, we haven't been able to avoid it altogether... you do have to put in average transaction size and volume but you can just make it up! We don't have any lock-ins and the minimum number of fees possible (no cancellation or other hidden fees).

That being said, the fixed cost of doing a digital transaction is NOT zero. They have to pay interchange, which is the largest portion of the fees which merchants pay to accept credit cards: http://feefighters.com/blog/infographic-what-is-interchange/

There are hundreds of different rates, and it is very likely that square is losing money on many of their transactions: see here: http://www.quora.com/Square-company/Can-Square-make-money-wi...