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Technology Tip

Technology Tip
Dave Pelland has extensive experience covering the business use of technology, networking and communications tools by companies of all sizes. Dave's editorial and corporate experience includes more than 10 years editing an electronic technology and communications industry newsletter for a global professional services firm.

Momentum is Building for Small Business Mobile Payments

Momentum is Building for Small Business Mobile Payments

For small business owners, the ability to accept mobile payments is expanding with new technologies and options that offer convenience and potential cash-flow improvements.

The idea of what constitutes a “mobile payment” has gotten broader in the past year with the inclusion of near-field communications (NFC) capabilities on many leading smartphones.

NFC communications, which form the basis of the Google Wallet and Apple Pay payment services, enable consumers to pay for transactions simply by holding their smartphones near a reader at a merchant’s point-of-sale (POS) terminal.

The use of NFC payments joins existing services that use external readers to turn smartphones and tablets into POS devices. They can be used at a retail center or on the go, if you provide services or sell items outside an established location.

Potential Benefits

Regardless of the technology you choose, accepting mobile payments offers a number of potential benefits. Customer convenience is cited as an important attribute, since making it easier to pay often translates into higher sales.

Similarly, mobile payments can speed up many transactions, if you’re not making change or customers aren’t fumbling for a payment card.

Accepting mobile payments also offers faster access to payments than would be the case with a check. It saves you the potential administrative and security challenges of dealing with a large number of low-value cash transactions.

Advocates for NFC payments say they offer more security than payment card transactions, because payment data is encrypted as it travels between the customer’s handset and the NFC reader. This means the merchant doesn’t have access to the payment card number. This reduces the risk of card fraud as well as the company’s responsibility for protecting card data as the transaction is processed.

As with mobile payment services that require the use of attached readers to swipe payment cards, most NFC transactions have a service fee that ranges between 2 and 3 percent (similar to a credit card processing fee).

Another advantage with NFC payment is that it is pretty simple to connect loyalty card data with the customer’s transaction information, making it easy to reward loyal customers without having to deal with paper punch cards or having to enter purchases manually into a mobile app.

Drawbacks Remain

While the idea of using a smartphone as a mobile payment device offers potential advantages, there are some considerations business owners have to address before deciding to accept mobile payments.

For example, not all small businesses have NFC readers, which require about a $500 investment for the reader and the associated software. This may be worthwhile for a restaurant or retailer, but could be impractical for a service provider.

Another potential obstacle is a relatively small number of consumers are actually using their phones as payment devices. There is a bit of a chicken-and-egg dilemma as consumers wait for more merchants to accept mobile payments, while merchants wait for more consumers to demand the technology.

As a result, mobile payments, for now, are more common with large retailers who can justify the technological investment, with many small businesses waiting for broader acceptance.

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