Image courtesy of squareup.com
Mobile payment processing allows businesses a simple and cost effective way to accept payments from their customers from anywhere – all that is required is a smartphone and an internet connection. Smartphone mobile payments is a top technology trend for 2015 according to Deloitte, a global professional services firm. They predict that more Canadians will be reaching for their cellphones instead of their wallets to pay for purchases this year. If your business is portable in nature, or you have a regular booth at markets or trade shows, the ability to accept mobile payments can provide flexible and convenient ways for your customers to pay you and can even help boost sales.
Understanding the options, costs and risks is important for both you and your customers when deciding on a mobile payment solution.
Mobile Payments Explained
The first step in understanding mobile payment options is to understand terminology. Here is a description of the key terms.
1. Digital Wallet. A digital wallet is not a mobile payment solution, but these tools paved the way for the mobile payment options that are available today. One of the largest digital wallet tools is PayPal. Digital wallets basically store credit card, banking and loyalty information in one secure location for repeat online purchases without disclosing credit card or banking information. Digital wallet tools are great features to add to your website as part of an e-commerce system.
2. Mobile Wallet. A mobile wallet is basically the same as a digital wallet, but stored on a mobile device such as a smartphone. Using a mobile wallet app, shoppers can use their smartphones to make payments at checkout. Mobile wallets, such as Google Wallet, allow users to store payment information as well as loyalty cards and digital coupons.
Apple Pay is Apple’s new mobile wallet/payment service that lets certain Apple mobile devices make payments at retail locations and at an online checkout. The service is compatible with the iPhone 6, iPhone 6 Plus, iPad, and the Apple Watch. Apple Pay is available in the US and is expected to launch in Canada in the fall of 2015. Apple Pay will compete directly with existing mobile wallet solutions including Google Wallet and Google’s Andriod Pay set to release later this year.
3. Near-Field Communication (NFC). Mobile wallet and payment solutions use NFC technology to transmit payment data. Near-Field Communication allows two devices placed up to four inches apart to exchange data. NFC allows for one-way and two-way communication between the devices. In order for this technology to work, both devices have to be equipped with an NFC chip. This means that in-store or mobile POS systems must be equipped with an NFC chip to be able to accept payments in this format. When a customer uses a smartphone to pay, the NFC-powered terminal subtracts money from the balance written to the card. NFC is faster and uses significantly less power than Bluetooth. Deloitte predicts that in-store mobile payments using NFC technology will increase by more than 1,000% worldwide in 2015.
4. Mobile Point-of-Sale (mPOS). Mobile point-of-sale refers to a smartphone, tablet or wireless device that performs the functions of a cash register or point-of-sale system. These systems can now accept forms of payment including credit card, debit cards, chip and PIN cards, and tap cards. The mPOS solutions explored in this article were not yet set up to accept mobile wallet payments using NFC technology, but these companies will certainly update their systems as more consumers adopt mobile wallets. Many retailers have already updated their in-store POS systems.
How Does an mPOS Work?
A small business owner can transform their smartphone or tablet into an mPOS by downloading a mobile app. When the business owners registers for an mPOS solution, the provider will send a card reader that plugs into the mobile device’s audio jack. Some mPOS vendors also provide hand-held docking stations that allow the device to read additional cards, barcodes and print receipts. An mPOS can operate as a stand-alone device that is tied to a business bank account, or as part of an integrated business management solution. To protect data, information is encrypted and stored in the cloud and not on the device.
Mobile Point of Sale Options
There are a number of companies that provide mobile payment solutions for businesses. Choosing the right provider depends on your device, desired features, security and pricing. Here is a list of some of the providers for Canadian small businesses. There are other options available – this this is just a summary of mPOS tools offered by larger or more widely known organizations.
Intuit QuickBooks – GoPayment. Using an app and a card reader that plugs into your mobile device, the system allows you to swipe, scan or key in credit card payment information and also integrates with QuickBooks software. The mobile app can also be used to record your cash and check payments. Swipe rates start at 1.75% with a 25-cent transaction fee.
Square. Square is one of the first and probably most well known mobile POS solutions. This start-up was formed in 2009 by Twitter creater Jack Dorsey. The Square Reader is a small credit card swipe reader that plugs into the headphone jack on an iOS or Android device. There is no monthly fee and all credit card transactions via swipe are charged a 2.75% fee. If you have to enter the card information manually, it’s a $0.15 charge, plus a 3.5% fee.
First Data. First Data offers First Data Mobile Pay and First Data Mobile Pay Plus. Similar to Square, First Data Mobile Pay uses a reader that attaches to a smartphone to accept credit card payments. The fee is $5 per month plus a per swipe charge of 2.6% plus $0.10. First Data Mobile Pay Plus provides a chip-and-PIN enabled PIN pad connected via Bluetooth to a smartphone. This enables you to accept credit or debit card payments. Fees are $15 per month for the PIN pad plus a per transaction fee of 2.6% plus $0.10.
Moneris PAYD. Moneris is well known for their traditional POS and business sytem solutions. They also offer PAYD for mobile payments. There are two levels similar to First
Data. With PAYD you can accept credit card payments using their card reader. PAYD PRO provides a Moneris PIN pad that connects to your smartphone or tablet. PRO lets you accept credit card, debit cards, chip and PIN cards, and tap cards. PRO costs 19.95 per month for the PIN pad plus 2.75% per transaction.
TD Mobile POS. TD Canada Trust offers a mobile payment system for businesses called TD Mobile POS. This system works with a TD Mobile POS PINpad that can accept most major credit cards as well as debit, EMV Chip and tap cards. Transactions are linked directly to a TD business bank account. There is a monthly fee for the PINpad as well as a per transaction fee that is competitive with Moneris and First Data.
Chase Mobile Checkout. Chase Paymentech offers mobile payment options with their Chase Mobile Checkout. You need a merchant account with Chase Paymentech, their Mobile Checkout app, and their card reader which is provided at no charge. Swipe fees at 2.59% plus $0.15 per transaction.
If you are considering offering mobile payment options make sure you the explore costs and fees, security and features that work for you.
The Right Solution for You
The trends certainly indicate that consumers are accepting and using mobile payments at an increasing rate. Although they are not getting rid of their physical wallets yet, alternative methods of payment are being adopted. As a small business owner it is important to offer flexible solutions to accepting payments – not only for customer service but also for your bottom line. Pay attention to consumer payment trends as they continue to evolve and impact how both small and large businesses get paid.