The PayPal Here card reader and app
If 2012 was the year contactless payments finally crawled vaguely into the mainstream, 2013 is shaping up to be the year when it gets much easier for small companies to accept card payments.
There are a whole slew of competing products emerging, all of which enable you to take card payments with your smart phone. They include:
- iZettle, which we covered previously but has since been updated to allow chip and PIN payments.
- PayPal Here, coming soon from the payments giant PayPal. This will also allow chip and PIN payments.
- Intuit Pay, a similar service which is currently being piloted with a chip and PIN card reader.
- mPowa, which currently uses a signature-based system but is in the process of switching to chip and PIN.
- SumUp, another signature-based system which is available now with a free card reader.
With so many companies entering the market, the next few months are likely to see aggressive competition. If you are looking to start taking card payments, you should be in a good position to get a decent deal.
Mobile payments with a smart phone
Most of these new mobile payment services function in the same basic way. When you sign up you get a card reader which connects to your smart phone. You also get an app which you must install onto your mobile.
Together your phone, the app and the card reader do the same job as the traditional card terminals currently used by retailers.
When someone wants to pay you, you open the app, enter the payment amount and process their card through the card reader. Some services use chip and PIN. but others only offer verification via signature, which is less secure. Over time, it seems likely that chip and PIN will become the standard method of taking payment.
The cost of a merchant account
What all these mobile payment services have in common is that they promise to simplify the business of accepting credit and debit cards.
At present, most companies need a merchant account to accept cards. Getting one can be time-consuming and expensive.
Typically, you pay a one-off set up fee, plus a commission of 1 - 3% on each payment. There's also often a monthly fee for the account itself, plus a charge for the hire of a card terminal - all wrapped up in a contract of 12 months or more.
In comparison, most of these new services charge up to 3% commission, plus a one-off fee (£50 - £100) for the card reader. With no minimum contract, they'll be attractive to companies who want to test the water or need to take card payments less often.
How will the banks respond?
The unanswered question - so far - is how the banks and other companies that traditionally provide card processing services will respond to the increased competition. Will it rouse them to slash their costs and increase the flexibility of their own services?
We'll be keeping a close eye on this market over the next few months to see exactly how things shape up. Once a few more services are publicly available, we'll take a closer look at the differences between them.
In the meantime, if you've had any experience using your smart phone to take card payments then leave a comment to let us know how things have gone.