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To compete with businesses like Square, Bank of America has made their own mobile payment service.

Since its introduction in 2010, mobile payment system Square has seen more and more entrants into the mobile money market. Verifone, COIN, Groupon, and GoPago are some of the bigger competitors trying to get a slice of the pie. And now they all have an even bigger player to worry about: Bank of America.

Starting in December, Bank of America will extend its mobile payments services to small retailers, which will allow them to use mobile devices such as smartphones and tablets as point-of-sale terminals. As one of the largest processors of electronic payments, Bank of America’s entrance into the small-retailer division of the market further validates the use of phones as payment terminals. Naturally, this means stiffer competition for all other existing contenders.

Bank of America’s Mobile Pay on Demand service becomes available on December 3rd. At launch, it will be compatible with both Android and Apple iOS devices, with no word on availability for Windows 8 devices. As with most other systems, the bank will provide the credit card reader and the application to be installed on the retailers’ mobile devices.

As it’s targeted at businesses that only process a few credit card payments daily, the Bank of America service will charge 2.7 percent of sales for swiped Visa, Mastercard and Discover purchases. In cases where the card number is typed into the app, it will cost 3.5 percent plus $0.15 per transaction. American Express processing is also supported, but fees range from 2.3 percent to 3.5 percent.

For perspective, Square charges 2.75 percent per payment or a $275-per-month flat fee with no transaction charges. Verifone charges 2.7 percent, and Groupon charges 1.8 percent plus $0.15 per transaction.

Whatever the rates, Bank of America is going to change the landscape of this financial sector. With such a large entity jumping into the game, it may not be long before competing banks follow suit.