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Mobile Payment is such a huge topic these days that it makes me wonder what it truly means and how it actually works. Turns out that it’s a pretty broad term. It’s being adopted in various ways, from web purchases, store purchases, money transfers, SMS based transactional payments to ticketing, parking and even taxi payments – that it can potentially be confusing.
According to Gartner Research, world-wide mobile payment transactions will reach $171.5 billion in 2012 alone. It predicts a 41% annual growth with a market totaling to $617 billion by 2016 with 448 million users.
This article is going to act as a primer for understanding mobile payment apps, readers and wallets. The mobile payment reviews and comparisons will be added as they are conducted.
What Is Mobile Payment?
Mobile Payment is actually another mechanism that allows you to pay for a product or a service wherever you are, anytime of the day. It’s portable, providing the ability for the user to make or accept payments using a mobile device they already own such as a smart phone or a wireless tablet. It’s a big move towards a cashless business model, although some mobile payment providers still offer a feature to process and track cash transactions. Not only is it a fast way to pay, it’s also quite convenient and is supposedly secure. However, there’s still no escape from the transaction processing fee.
There are many types of Mobile Payment out in the market and new technology continues to emerge each day. The typical Mobile Payment scenarios include: 1) Businesses using their smartphone or tablet to process their customer’s credit card payments, 2) Customers using their smartphones to pay for a purchase instead of presenting a physical debit or credit card, 3) Customers using their mobile device to access online shopping carts.
This new Mobile Payment technology will definitely change the business landscape for consumers and the major players in this ecosystem like banks, mobile carriers, card networks, and device providers. However, there will also be a huge impact for business owners, especially solopreneurs.
Should Small Businesses Embrace This Emerging Technology?
As a small business owner myself, I’m always looking for ways to grow and increase my business profitability. One way I try to achieve this is by finding ways to minimize, if not eliminate, fees that come with every sales transaction.
Mobile Payment can provide a way for a small business to accept debit card or credit card payments from its customers without using the traditional point-of-sale (POS) system. There are many small businesses out there that only accept cash payments. Not only would this mean missing out on sales revenue, but handling cash has its own challenges such as making sure there is enough change, accounting for what’s on hand and making trips to the bank to deposit or withdraw.
It can also be complicated and expensive to set up a credit card account as it requires investing on a POS system, applying for a merchant account and finding a payment gateway. A Mobile Payment provider is a one-stop shop, thereby making the entire setup process less complicated, with no strings attached. They can also provide more competitive transaction fees than credit cards. Many even offer pay-as-you go plans with either a flat monthly fee or a fixed rate per transaction.
And depending on the provider, they can offer added functionality such as loyalty programs and social marketing that can help boost sales. Some even have portals which will allow you to analyze your sales history, know who your customers are and even download transaction details. There is a big probability of eventually being able to integrate with accounting systems or inventory management systems to create more efficiencies in back-end processing.
The reality is that consumers are already using their mobile devices heavily to manage their day-to-day activities including buying a cup of coffee. Should you join the Mobile Payment bandwagon or not?
Mobile Payment Solutions
I attempted to investigate and group together the more established platforms to date and the current top players in this space. I believe that these are the up and coming, if not the more recognized, providers that small businesses should be aware of.
The available Mobile Payment solutions (sometimes called mobile payment apps) can be practically used by anyone – someone holding a garage sale (or selling via Craigslist), big or small businesses, home-based businesses, retailers at fairs (or farmers markets), food trucks, caterers, tradespeople, delivery services, professionals and many more.
One good thing about the newness of this technology is that if you happen to be an early adopter, many still have programs in the beta testing phase – this may be advantageous for your business.
I. Mobile Card Readers (with external device attached)
This particular solution still requires the customer to present their physical credit card. It uses a mobile application plus an encrypted external device called a card reader that is plugged into a mobile phone or tablet. The customer’s credit card is swiped using this plastic device attached to an iPhone, for example, and then the transaction is processed for authorization. This is very similar when you hand over your credit card to a cashier at a supermarket or at a restaurant, and it is processed using a physical point-of-sale terminal.
This solution also provides options to get the customer’s signature, email a receipt, process refunds, access reports and transaction details and even identify the location where the payment was made for added security. No card information is stored in the card reader or mobile device.
The current leader in this group is Square in terms of technology and early market entry. But PayPal will not be left behind with its millions of users.
Mobile Card Reader Providers include:
- Square (available in the U.S. and Canada) – https://squareup.com/
- Verifone’s Sail (only available in the U.S.) – https://www.sailpay.com/
- PayAnywhere (available in the U.S. and Canada) – http://www.payanywhere.com/
- Intuit’s GoPayment (available in the U.S. and Canada) – http://gopayment.com
- PayFirma (only available in Canada) – http://www.payfirma.com/about_us/
- Kudos Payment (only available in the U.S. and Canada) - http://takekudos.com/
- PayPal Mobile (only available in the U.S.) - https://www.paypal.com/
II. Mobile Card Readers (device-free)
This solution still requires customers to present their physical credit card. But rather than using an external device where purchasers can swipe their credit cards, a previously installed app turns the cellphone itself into a reader.
All the merchant has to do is take a snapshot of a purchaser’s credit card number using their mobile phone camera. The resulting picture is converted by the mobile app into a digitized number. Then, the customer has to enter their card information verification as well as a signature to authenticate and approve the transaction. No images or data are also stored in the phone just like card readers.
There is also an option to send out a receipt to customer plus various social marketing tools including access to reports and transaction details.
So far, I have not come across another provider using this ‘photo’ technology. The current leader in this space (by default) is Flint Mobile – https://www.flintmo.com/
III. Mobile Wallets
This solution – also referred to as digital wallets – allows a customer to store their debit card and credit card information on their smart phone. The whole premise is to leave your physical wallet, which can get really bulky if you have numerous cards, at home . Your phone thus becomes your credit card, which is pretty nifty.
Payment information is transmitted by tapping your phone against a compatible card reader available in selected retailers, after which payment confirmation is sent back. This seamless transaction is made possible as a result of the use of NFC or Near field communication technology, which allows electronic devices – such as smartphones – to transmit data to each other via radio communication when they are either within close proximity or tapped against each another.
For small businesses, this means investing in accreditation and also purchasing card readers that can be recognized by ‘mobile wallets’. Big box retailers like Walmart, Target and Best Buy are in a rush to bring this technology to the next level with their ‘scan-and-go’ concept. This will allow their customers to use their mobile device to scan the barcode of items that they’re purchasing and pay for it at the same time. It makes me wonder, though, what kind of controls will be in place for this to prevent theft.
Square is also competing in this space by partnering with Starbucks coupled with a loyalty card. Keep in mind that a lot of the technology is still in development and for some Mobile Payment providers the coverage is limited to a number of retailers in specific areas and is still not widely available. The dominant player in this space is Google Wallet.
Mobile Wallet Providers include:
- Google Wallet – http://support.google.com/wallet/bin/answer.py?hl=en&answer=2549613
- Isis – http://www.paywithisis.com/
What’s right for your small business (5 Key Points)?
The right investment decision will depend on what you feel is right for your small business at the current time. It’s a given that all businesses want a healthy, profitable bottom line and loyal customers. However, if you’re interested in using new technology to attract more customers and find that your target market is increasingly using mobile devices you may want to consider these 5 key points:
1 . Features and Functionality
- Will this work with my current mobile device?
- What type of cards does it accept? Does this include the major card companies such as Visa, MasterCard and American Express?
- Does it have all the ‘must-have’ features I’m looking for?
- Will there be integration to my back-end system?
- How secure is this?
2. Ease of Use
- Is this simple to use?
- Is it user-friendly?
- Is training required? If yes, will the provider facilitate this at no cost?
- What kind of support do I get? Is it available 24/7?
- How much does the provider invest on product development?
4. Cost to operate
- How much is the initial cost to set up including hardware, software, devices, sign-up fees, etc?
- What is the monthly cost to operate?
- What pricing plans are available?
- Is a contract with the provider required?
5. Return on Investment (ROI)
- How fast is the access to funds?
- How long before I can recover my investment?
Mobile Payment Reviews
- Payfirma Review
- Square Review
- PayPal Here Review
- Intuit Go Payment Review
- PayAnywhere Review
- Kudos Review
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