Mobile payment systems are transforming the payment environment for small businesses.
While the traditional point-of-sale credit card terminal is far from dead, more small firms are shaking up the way they sell by experimenting with mobile payment methods. U.S. mobile commerce sales hit $5.3 billion in 2011, up more than 80 percent from last year, according to investment firm Barclays Capital. While this still represents only a sliver of the $2.1 trillion total purchase volume in the U.S., growth like this is hard to ignore.
For some business sectors, including certain retailers, using mobile payment options is beginning to make sense. Consider these three steps if you're looking into accepting mobile payments for your business.
1. Research your options.
While several types of mobile fund transfers are possible, for most businesses there are two basic options. The first is to use a smartphone or tablet with a card reader device to process credit card payments. Examples of card readers include San Francisco-based Square and Troy, Mich.-based Pay Anywhere.
Increasingly, this type of mobile point-of-sale is also offered through large banks. JP Morgan Chase, for example, has several mobile processing tools through a brand called Paymentech.
The second choice is to offer “contactless payments.” This allows consumers to pay for goods and services by using virtual credit card information stored on a smartphone that communicates wirelessly with a nearby payment terminal. One example is Google Wallet, which works by tapping a smartphone against an enabled terminal. Traditional third-party point-of-sale terminal suppliers such as Equinox Payments also support contactless payments on its newer model point-of-sale terminals.
2. Contact your bank.
If your business already has a merchant account with a major national bank, find out if it offers a mobile payment service as an extension of your existing business bank account. An example is Chase’s Person-to-Person Quick Pay program, which lets users send money over email or text messages. Bank of America and Citibank also offer basic mobile payment services.
If your bank doesn't support mobile payments, third-party mobile card readers offer the easiest on-ramp to mobile transactions. All you need to do is create an account with a company such as Square, Intuit’s GoPayment or Pay Anywhere, get an often-free card reader and install its app on your mobile device. Fees are usually transaction-based. For example, Square takes a 2.75 percent fee from every sale.
Using contactless payments can be the most complicated option. The technology is still dependent on using enabled smartphones, such as the Samsung Nexus S, but many popular devices including the iPhone still don’t have this capability.
You'll also need a contactless payment reader. Those usually are acquired from third-party vendors and can cost several hundred dollars, plus annual rental fees and per-transaction charges.
3. Get connected.
No matter which mobile commerce option you choose, you'll need to integrate that system with your current check-out operation. Tools such as Square, for example, attempt to completely replace your point-of-sale software, which may or may not make sense for your business. How transactions will be handled by your accounting, customer relationship and task management software can also be an issue.
QuickBooks users may find Intuit’s GoPayment mobile tool makes the most sense because accounts come with simple to use, built-in QuickBooks integration. Others may not. And then there are the standard issues inherent to merchant banking. Google Wallet, for instance, still only accepts Citi MasterCard and Google Prepaid cards. Visa and American Express users are out of luck.
Overall, smartphone point-of-sale and contactless payments can make sense for several types of businesses and help to simplify the payment process. But there are limitations. While mobile commerce can seem like an attractive option, you’ll need to decide if it is something your customers and your business are ready to embrace.