Thursday, May 24, 2012

Mobile Payment Processing Options Growing

The options available for merchants of any scale to process credit cards have been growing at a rapid pace. In fact many service providers in the industry have been tripping over themselves in their attempt to keep pace with innovations and also carve out their niche to give the appearance of being a better deal than their competitors. Essentially, there is little difference between the majority of services offered on the mobile market, but the small differences may be significant enough to make one or another of the options a better fit for any particular merchant.

An important point to mention here is that the industry and products are changing. This is a snapshot of offerings as they are available in May, 2012. The broad strokes are likely to remain intact for a while, but it never hurts to double check the industry trends. Also, because the big, bad Visa and MasterCard corporations adjust their Interchange rates and fees every six months or so, pricing may fluctuate over time.

"Mobile" payments used to be relegated to the likes of PayPal, which meant processing from your computer at relatively high rates or perhaps using a phone service that required calling in and using touch tone entry of the card number, also at high rates. Other PC based solutions existed that allowed for card swipers to be attached to a laptop, and these usually required service providers that had merchants hooked on long-term contracts. And there were high-priced mobile terminals that were built around cell phone chips that came with expensive monthly fees.

Technological Revolution Drives the Mobile Processing Industry

Then the smartphone began opening up the realm of mobile computing. With many phones and tablets on the market today being more powerful than the laptops of just a few years ago, it makes sense that this power would be harnessed to do more work for every aspect of business. Innovative companies like SquareUp were strong out of the gate with a product that merchants were hungry for. Online pioneers like PayPal have been slow to catch up, while numerous processing companies have stepped in to fill the gap between the expensive mobile processing solutions and traditional lower-cost merchant services contracts.

At the high end, solutions like Sales Vu have been created as robust (and sometimes still expensive) POS Systems that can handle multiple outside points of sale while synchronizing with a de-centralized brain out in the computing cloud. It's a fancy solution that is appropriate for a large sales-force and could be the best solution for some mid-sized merchants as well, if they are comfortable operating off of an iPad. At the low end, SquareUp offers very basic POS functionality  on the iPad and I have seen retailers using it quite effectively (although only on the iPad platform, where Square makes its strongest showing). In the middle, however, is where I find the most compelling choices for the widest number of merchants.

Mobile Credit Card Processing Platform Options

Currently, there are a number of handy available mobile platforms for processing credit cards. 
  • Stand-alone terminals
    • Store and forward "wired" terminals
      • These are typically standard wired terminals that need to be connected to a phone line or wired into an Internet network in order to authorize the transaction. Store and forward functionality allows the card information to be swiped and stored for later transmission, but there is the risk of a card not authorizing for various reasons and the charge, therefore, not being processed. In many cases, there is no recourse for the merchant as the sale has been completed and the customer long gone. However this solution does work well for some merchants, especially if it is a rare occurrence that sales are made outside of the primary business.
    • Wireless terminals
      • Bluetooth
        • Most commonly used when the terminal is paired with a cell phone or computer which offers the processing connection, these terminals can be used virtually anywhere that one of those other devices can get service, but the terminal is completely dependent upon the other device for its functionality (although it will likely "store and forward" data when a connection is unavailable).
      • Wi-Fi
        • Much like a Bluetooth terminal, a Wi-Fi terminal relies on a host network or hotspot for its connection. The upside is that they are generally able to move around more freely within the network range. There may be some question about the security of either a Bluetooth or Wi-Fi terminal, as both types of signals can be intercepted by a hacker, though it is unlikely that the encrypted data would be decipherable. 
      • Cellular
        • This is a standard stand-alone terminal that has a SIM card inside just like a modern mobile phone. The SIM card enables the terminal to act like it is a cell phone, dialing in for every transaction. There are generally some extra costs involved with the operation of this type of terminal, specifically the monthly cost addition of having its own phone number (even though it cannot be used as a phone) and the additional costs per transaction every time it processes. One downside is that merchants must frequently pay the monthly fees for the wireless service even if the terminal is not being used in that manner for extended periods. 
  • Other devices
    • Laptop computers
      • Virtually any computer can be turned into a processing terminal with the addition of a USB card reader and the proper software. Most of the software on the market simply provides an encrypted transmission to a third-party gateway such as which then passes the data through to the merchant's actual processing company. Some software, such as PC Charge, will process more directly. But the computer in use must still have an Internet or phone line connection for these software options to work differently than the "store and forward" function built into many terminals. One advantage to the laptop solution, however, is that the software often allows for inventory control and other data perks often associated only with high-end POS Systems (many of which are merely built on top of a pre-existing computing platform).
      • Key entered transactions can be entered through many web-based services, usually forcing the merchant to be classified as a MO/TO (Mail Order / Telephone Order) business. These services universally cost more than swiping cards, but they can be extremely convenient for merchants who only do a small number of card-based transactions.
    • Smart phones and tablets
      • Operating systems
        • Android
        • Blackberry
        • iOS
        • Palm / WebOS
      • Comparable functionalities
        • Interestingly enough, the Palm and Blackberry operating systems were around for a long time with virtually no support for merchant processing. The only Palm or WebOS solutions that seem to have arisen were actually just gateways to process through an existing web service like or PayPal. Card readers were not designed to work with these operating systems, so they generally have been used only for web-based key entered transactions. At least two services have recently rolled out viable software and card reader solutions for Blackberry devices, however, including PhoneSwipe and Payment Jack.
        • Both the Android and iOS operating systems have found heavy support in the processing industry. Jump-started by SquareUp, a company backed by Visa that ironically has become known as one of the least secure card swiping solutions for mobile phones, the sub-industry of mobile processing has exploded on these two platforms.
          • Android
            • Leader in the shear number of compatible phones, this modern operating system is available for both the phone and tablet platforms. Although the hardware almost always will support the key entered processing of cards, not all devices will work properly with the encrypted card readers supplied by the processing companies. Square's card reader works with some devices that other company's products won't simply because it is not encrypted and therefore requires less power to operate. The issue is usually that a phone (or tablet) either does not have a modern 3-channel audio jack or that it sucks too much power from the battery through its processor (many dual-core phones have this problem) without leaving enough for the card swiper to operate properly. Still, the majority of phones seem to work, provided that they are at the required version of the operating system (which varies based upon the processing company providing the software). Android devices also tend to be phones of have built in SIM card compatibility, though there are many Wi-Fi only tablets as well (see above for the potential issue, however rare or unlikely).
          • iOS
            • Apple's innovative hardware and software integration and quality control have made this the premier platform for mobile card processing. Most processing companies have focused on this market first, rolling out their comparable Android software either in tandem or right after the release of the iOS version. However, there have been hiccups when Apple drastically changes things between version numbers (the transition to iOS 5 was particularly bumpy as many apps simply stopped functioning correctly), and the software writers have a very busy period following these "upgrades." As with any software that a merchant relies on, it is best not to upgrade until operating system compatibility has been ensured. One true upside to the Apple products is that they pretty much all just work and there is a lot of consistency among them, from the iPod Touch to the iPhone to the iPad. Some of these models only have Wi-Fi connections (see above for the potential issue, however rare or unlikely), though the iPhones and many iPads also have SIM cards compatibility.

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