Technology: Mobile Payment Firms Target Small Businesses With Lower Pricing

Consumers are ready to embrace smart phone payment options as long as the systems involved are safe. The question now is: are more small businesses ready to consider using them – especially since some major providers have reduced fees in an effort to capture their business? The service is especially attractive (and much more affordable) for businesses that don’t like paying processing fees to credit card companies. Mobile-payment service businesses recently have reduced their fees in an effort to capture more market share from start-ups and small businesses, and the activity in the marketplace suggests that end-users will benefit as competition increases.

San Francisco-based Square Inc., which was launched in February 2011, recently dropped its fees – eliminating the flat fee component for card-present sales and charging merchants a straight 2.75 percent per transaction. Square’s customers receive a free card reader when they sign up. This card reader plugs into the earphone jack of an iPhone or Android. Square subtracts the transaction fee immediately at the point of sale so businesses can see exactly how much they’ve netted on a daily basis. The company allows its customers to accept unlimited payments, but individual transactions more than $1,000 might take up to 30 days to transfer to customer accounts. This policy is designed to reduce risks associated with charge backs, but the company will adjust the cap they apply on a case-by-case basis for customers who routinely have transactions that exceed $1,000. Adjustments require the business involved to provide Square with additional financial information about their company.

GoPayment, an Intuit company, followed suit a couple of months after Square simplified and reduced its fees. One of the first mobile-payment service companies to target the small business sector, GoPayment was developed about two years ago specifically to serve small firms.

Because of its relationship with its parent company Intuit, GoPayment is the only service compatible with QuickBooks. Its pricing plans are flexible and it sets no limits on how much money customers can process. Earlier in the year, GoPayment had raised its percentage-based fee rates, but recently it began offering card readers free to its subscribers and eliminated monthly fees for low-volume merchants. Although Intuit does not attribute its revised prices to competitive pressures, it appears that GoPayment and Square are going head-to-head in a turf battle to grow their respective market share.

Of course, Square and GoPayment are not the only players in the mobile-payments sector. Small businesses should check out other providers – they all have their own unique features and some will suit specific businesses better than others.

Columbus-based Swipe started up in 2009. Merchants’ rates depend upon the type of card being used – in other words, fees vary for credit or debit cards and for corporate, business or government-issued cards. Its primary customer base is independent, small and mobile businesses. It is affordable and simple to use and prides itself on its customer support services. The service is available only for iPhones and iPod Touch.  

Another service is Obopay, which was launched in 2005 and can be used on any mobile phone. Obopay accepts payments in-store, by text messaging and networking sites. It also offers merchants the option to have their customers pick up the transaction fee – a boon to nonprofits and charitable organizations seeking donations. It offers a wide range of tools and solutions and is actively seeking partnerships with large global companies to help it reach more small businesses.

As in any competitive business, pricing and special offers change frequently. Contact suppliers directly for the most up-to-date information on services and pricing.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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