Mobile Payments: Getting Paid on the Go
Your smartphone or tablet is always with you, including at customers’ sites. The suddenly indispensable devices connect you to your team and office, making once difficult tasks seem relatively routine.
Yet your smartphone can do more than allow you to text your employees and email bids to customers and prospects: it can accept credit card payments. But does the convenience for your customers (no checks to write or additional bills to pay) outweigh the costs of finding a mobile payment solution that works for you?
The hardware requirements for accepting mobile payments are pretty do-able: a smartphone or tablet with cellular capability and a credit card reader that plugs into the device’s audio jack. That’s it. The card readers are so inexpensive that the mobile payment processors offer them for free when you sign up.
Make the Right Choice
It can be a challenge to choose the right mobile payment processor. NerdWallet, a respected, impartial financial advice site, recently reviewed several large and small payment processors and found that size didn’t matter when it came to the processing fees the companies charged.
“The bottom line is that there is a large amount of variance between payment processors,” said Anisha Sekar, Vice President of Debit and Credit Products at NerdWallet. “PayPal Here is a good choice for small sales. For larger sales Breadcrumb is pretty great.”
Payment processors charge a small fee per transaction and sometimes a monthly fee. The fees can add up, Sekar said. “A 2%-3% fee can eat away at your profits, especially for small businesses who are cutting it close to the margin as it is,” she said.
Sekar’s analysis of payment processors shows that Breadcrumb is the most cost effective for businesses that have many transactions more than $400, less than five figures in monthly mobile payments and don’t take American Express. (Sekar said that some payment processors’ software, including Square and Intuit’s own GoPayment, integrates with Intuit’s QuickBooks, so it might pay to check them out if you use QuickBooks.)
Some payment processors offer plans with no transaction fees but there’s a catch. The payer and payee must have the same app installed and configured, and that can be more cumbersome for customers than cash or a check.
The American Express Dilemma
Sekar said that many business owners are caught in a pickle when it comes to taking “the helmeted soldier” due to the card’s higher transaction fees. “Many merchants choose not to accept American Express because you will pay 1%-2% more,” she said. “If you don’t accept it, there is a risk of alienating customers. In my experience, a lot of customers know that many small businesses don’t take AmEx so they have another backup card in their wallet that they can use.”
How much more does it cost to accept AmEx? A lot. “Groupon’s Visa, MasterCard and Discover are 1.8% plus 15 cents per transaction while AmEx can be as high as 3.5% plus up to 15 cents,” she said. Merchants must decide if accepting the card that the customer wants to use is worth the increased cost.
Other Mobile Payment Costs
Transaction fees aren’t the only costs for merchants who accept mobile payments, although they will likely end up being the largest one. While the card readers themselves are very cheap or even free, you still need a smartphone or cellular-equipped tablet for the payment processing app to work.
Business owners need to decide if they want to equip each tech with a smartphone or tablet and pay for the monthly service. If you’re thinking about sticking a toe in the water of the mobile payment pool, it might make sense to equip one or two techs with the ability to accept mobile payments to see if customers and employees like the service and if it pencils out.
Reviews of Mobile Payment Processors – It Pays to Shop Around
While NerdWallet did a good job of breaking down the fees charged by mobile payment processors, Digital Trends produced a good roundup of three of the top processors (Square, Intuit GoPayment and PayPal Here), rating their credit card readers, service and support, availability of funds, in addition to their fees. Even though there wasn’t a clear winner, the breakdown makes for interesting reading. For example, if you value quick phone support when trying to resolve a problem you’ll want to avoid Square, as they only offer Twitter, e-mail and a knowledgebase for assistance.
Does your business accept mobile payments? Comment and let others learn from your experience.
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