Q. I've been hearing about mobile payment options a lot lately.
As a small-business owner, I'd be interested to learn how they work
and what options exist.
Ensuring customer payments transact seamlessly, securely and reliably is a top priority for small-business owners. Accepting non-cash payment options, such as credit cards and debit cards, has become a must, and many small-business owners are turning to smart phones for an easy solution. Several companies have developed options that are simple, convenient and secure, plus allow merchants and consumers to use their smart phone or tablet for payments.
Dongle-based mobile payments
A "dongle" is a USB device that plugs into the headphone jack of a mobile phone or tablet. Card reader dongles work with special applications that allow business owners to swipe credit and debit cards on their tablets or smart phones to accept them as payment. After registering with a provider, business owners download an app, link their business banking account to the app and plug in a special card reader to their device. Customers swipe their credit/debit card and sign the screen with a finger to pay. The app and the card reader are typically free. Three of the most popular dongle-based mobile payment options are:
* Square offers both monthly flat-fee and per-transaction-fee payment options. Merchants can personalize the checkout experience with customized invoices and can run summaries and reports from the app.
* Intuit GoPayment offers both monthly flat-fee and per-transaction-fee payment options. Features include the ability to sync with QuickBooks and to email/text custom receipts to customers. Business owners also have access to a free Merchant Service Center to run custom reports, reverse/process transactions and more.
* PayPal Here offers a flat per-transaction fee and allows merchants to accept PayPal and checks, in addition to credit/debit cards. Payment is integrated into a PayPal account instead of a direct bank account. Business owners can invoice from the PayPal Here app and track cash payments.
NFCs and mobile wallets (contactless phone payments)
The next generation of mobile payment options includes near-field communications (NFC) and contactless phone payments. These options require the customer to have special apps on their phones that store credit/debit card information. The customer either taps or holds their phone near the merchant's phone or specially designed reader to process payment. These options require that both the customer and merchant have the app. Some providers require the merchant to have a special reader device. One caveat is that each provider currently only works with specific phones.
Contactless phone payments are gaining momentum, especially among young consumers who like using apps and are looking for convenience- based mobile payment solutions. Here are three popular options:
* LevelUp uses personalized QR Codes to complete mobile transactions. Each customer is given unique QR codes when he/she registers a credit/debit card. The codes are read/scanned at the merchant's checkout to pay. LevelUp does not charge transaction fees, and the reader device and app are free. Businesses are charged based on loyalty campaign success and customer points redemption (40 cents per $1 of credit used by customers). For example, if a merchant offers a $2 credit on a $10 purchase, LevelUp collects their fee against the $2 credit (80 cents). Currently, the LevelUp app is available on iPhones and Androids.
* Google Wallet uses NFC technology. Consumers who have uploaded their card information into the app tap the back of their phones on a special NFC terminal to pay the merchant. Business owners need a special NFC reader device. There are no fees for accepting payments, and business owners can provide special offers and coupons. The app is currently available on select Sprint phones.
* ISIS Mobile Wallet operates like Google Wallet but is a joint venture between AT&T, T-Mobile and Verizon. Consumers need to have an Isis-ready phone, then download the app. Merchants need to have a special ISIS NFC reader device to connect with customers.
Business owners should investigate each mobile payment option thoroughly. Check rates, read reviews, ask about transaction fees, fraud protection, charge back fees, monthly minimum fees, equipment fees and installation fees before creating an account. Business owners may want to offer both a dongle-based system and a contactless phone payment solution to provide the most convenient options for their clients.
Rose Fitzpatrick, CPA, is a supervisor with Wiss & Company LLP in Livingston. Participants in Ask the CPA are members of the New Jersey Society of Certified Public Accountants (NJSCPA). More information is available at the NJSCPA's public service website: MoneyMattersNJ.com.
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