Mobile Payments are Exploding: What You Need to Know as a Retailer

mobile square payment

Accepting payments via mobile device is becoming more and more mainstream. Right now, we are in the midst of a growth spurt that will see mobile payments in the U.S. hit $90 billion by 2017, according to a Forrester Research report released earlier this year. That’s up from $12.8 billion spent in 2012, the report states.

It’s also easier than ever to join the party, and retailers have an almost overwhelming number of options. There are several companies that cater to each type of mobile payment. Some companies (like Square) you are likely familiar with, but there are new faces popping up all the time.

It pays to check with your bank or merchant service provider to see what they have to offer. Organizations, like Community Merchants USA, also have resources on mobile payments and acceptance in order to help businesses understand this growing and rapidly changing method of payment.

To help you find the best fit for your business, here are a few things to consider when choosing your mobile payment processor:

What Type of Mobile Payment Works for You?

If you are not ready to let go of swiping a physical credit or debit card, there are a number of companies that allow you to use a card reader inserted right into your smartphone or tablet, including:

If you’re looking for something that doesn’t necessarily require a card, you have options there as well:

LevelUp allows customers to present a QR code (linked to their credit or debit card) from their smartphones for payment. The retailer then uses a LevelUp terminal to scan the code to complete the transaction.

Similarly, MasterCard’s PayPass and Visa’s payWave use near field communication (NFC) technology to accept payments. Customers with NFC-enabled smartphones just tap or hover their phone over the terminal to make a payment. Both PayPass and payWave accept NFC-enabled credit cards as well, and PayPass also accepts payments from Google Wallet.

How Much Will it Cost?

Transaction fees for mobile payments are relatively cheap and simple to understand. Many companies advertise a flat rate per transaction with no hidden fees or monthly charges, but most also charge a higher rate for cards that are manually entered or keyed in.

Advertised fees typically hover around 2 to 3% of the total payment per swipe. Groupon’s Breadcrumb is on the low end of that range, advertising 1.8% plus $0.15 per swipe, while Square and GoPayment advertise 2.75% per swipe. Some companies offer a lower per-swipe rate for an additional monthly fee. For example, GoPayment offers an option to pay $12.95 per month for a 1.75% per swipe fee.

LevelUp is unique in offering completely free credit card processing if you participate in their Interchange Zero program. The program requires you to run a marketing campaign with LevelUp and for every dollar your customer spends as a result of that campaign, $0.40 goes to LevelUp.

Will it Work With What You Already Have?

The majority of card readers and apps will work with both iOS and Android devices, but it’s more difficult to find those that support BlackBerry.

PayAnywhere and ROAMpay are two companies that have something for all three.

What Are the Perks?

All mobile payment processors offer credit card transactions that are convenient and quick, so what else can they do for you? There are many different features available from various companies.

Intuit’s GoPayment will sync information with your QuickBooks program. Groupon’s Breadcrumb Payments offers a plan with features specifically tailored to restaurants and bars. PayPal Here also accepts checks and PayPal payments.

Find the company that gives you the most value for your needs.

Stay Open-Minded

There are a lot of possibilities out there, and this article is in no way a complete list. No matter what approach you consider, keep in mind that the mobile payments industry is growing and evolving. It’s a good idea to remain flexible and be wary of committing to a mobile payment method or company that restricts you from future options.

Don’t Forget to Ask Them to Show You the Money

Make sure you are aware of the program requirements as to when you will get paid. Here are two important questions to ask:

1. When are your funds available?

Groupon’s Breadcrumb advertises next business day deposits into your bank, but with PayPal Here, funds are available in your PayPal account within minutes.

2. Are there any limits?

Square, for example, has a weekly deposit limit on manually-entered card transactions.

11 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

11 Reactions

  1. Martin Lindeskog

    Anita: I am glad to see that things are moving regarding mobile payments on the North American market. Isn’t it right that it has been pretty conservative and taking some time before the explosion of services, if you compare with other markets, e.g., Asia, Europe and Africa?

    iZettle from Sweden is a great example of a mobile payment provider that has been successful with its service in Scandinavia and the U.K. American Express has invested in this company.

    I will check out the resources of material on Community Merchants USA’s web site.

    • Anita Campbell

      Hi Martin,

      I think the U.S. has always been behind other parts of the world when it comes to the use of mobile devices.

      When I spent time in the U.K. in the 1990s running a company division, everybody was glued to their mobile phones in Europe. But a lot of my colleagues in the United States didn’t even have mobile phones at the time.

      However, I think there’s a lot of innovation now in the United States and things are catching up — fast!

      - Anita

      • Martin Lindeskog

        Anita: Thanks for the report from the United States of America? Is mobile payments popular both in big cities and small towns?

        I am glad to hear that North America is catching up! I look forward to live the mobile lifestyle, “digital nomads,” in the future… :)

  2. Anita Campbell

    Martin, “digital nomads” is a great term. And that applies to merchants.

    A family member creates hand-turned wooden items and he doubled his revenue (and profits) by getting a mobile credit-card swipe system. So now when he goes to craft shows, he can easily accept credit cards, without a lot of extra expense. He used to spend many hundreds of dollars for a hard-wired connection from the show promoters, so that he could accept credit cards. Or he would have to limit his sales to cash and checks. Either way, it ate into his profit margins.

    Now he can use his iPhone to accept payments. He is an older “retired” gentleman and was not familiar with mobile payment systems until I told him about them. Now he’s a devoted fan. That’s the power of mobile payments to small business owners who are involved in commerce!!!

    - Anita

    • Martin Lindeskog

      Anita: Inspiring story! Thanks for sharing! :)

      In Sweden the tax agency has demanded that all small business owners – like people selling handicrafts at flea markets – to have a cash-register system with a black box so the “bumbailiff” could check the cash flow and all the transaction in and out. These cash-register machine could cost $5000 or more.

      With the mobile credit-card swipe system hooked up some kind of virtual black box, the small business owner could get away with a much cheaper alternative.

  3. Very interesting article and very informative with regards to using mobile to make credit card payments via applications on smartphones incorporating the credit card details or prepaid cash balance on mobile.

    Are there mobile banking payment solutions where it does not involve credit cards or prepaid cash to the mobile banking company but rather on basis where the purchases are:

    -added to purchaser monthly mobile bill sent by his mobile carrier….if purchaser has post paid account with his her mobile carrier
    -deducted from purchaser prepaid mobile balance of his her mobile carrier….if they have a prepaid account with his her mobile carrier.

    Then it will be the mobile carrier paying the sellers and merchants for such purchases.

    I think such mobile banking payment solutions would be much better for purchaser and safer as they do not involve credit cards etc.

    Wild be grateful for any information on the above.

    Thanks

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