In today’s world, the ability to accept mobile payments and other payments from mobile apps is critical to retail success. Mobile card readers allow businesses to easily take credit and debit card payments from disparate locations, using a minimum of equipment. Mobile app payments allow consumers to pay digitally, freeing them up from having to carry credit or debit cards (or even cash) at all. In the future, these two payment methods will comprise an increasingly larger portion of payments overall.
Let’s take a closer look at these two technologies that can greatly benefit your small- or medium-sized business:
Mobile card readers
Mobile card readers provide an efficient and low-cost option for small- and medium-sized businesses (SMBs) looking to take credit and debit card payments. In the past, merchants had to use relatively immobile terminals to accept credit card payments. (In theory, these terminals were portable, but in practice, because of how they were set up and wired in, they didn’t move much.) Now, with the advent of mobile card readers, companies can take card payments virtually anywhere.
Most portable card readers are easy to use and can be integrated into an organization’s existing point-of-sale (POS) system, effectively becoming mobile POS systems. They can pair with a smartphone, tablet, or other mobile device via Bluetooth or a standard headphone jack. After a customer makes a purchase, the seller follows a few simple procedures to accept payment using a portable card reader. Here’s how it works:
First, the merchant keys in the price for what’s being purchased. Second, the customer’s credit or debit card is swiped, dipped, or scanned. Next, the customer provides their signature. Lastly, the customer receives an electronic receipt via email or text message after the transaction is complete.
It’s a fact that SMBs have a better chance of accommodating the payment preferences of their customers, if they use mobile card readers. According to the 2022 findings of the Diary of Consumer Payment Choice, 57% of all payments made by consumers in 2021 were effected using debit or credit cards.
As the number of customers using cards to pay for goods and services has grown, so has the advantage of portable card readers. If merchants only take cash for consumer transactions, then they wind up turning away clients who don’t carry cash or don’t have sufficient cash on them. When given a choice to go get more cash or simply forgo the purchase and save themselves an expense, the majority of consumers tend to choose the latter option.
It should be noted that both consumers and retailers are wary about the safety of electronic payment systems. To avoid fraudulent charges and credit card data theft, mobile card readers employ a process called payment tokenization. Before transmitting sensitive information like a credit card number, tokenization encrypts the information into an encoded representation called a secure token. It’s this token that’s transmitted rather than the original data.
When companies accept credit card payments, they need to pay merchant processing fees, and these fees can vary depending on the type and brand of card used to make the purchase. Merchant processing fees are the cost incurred by a company when it accepts credit card payments.
Merchant processing fees are a standard cost of doing business, often ranging from 1.3% to 3.5% of each transaction’s total value. Additional fees, such as chargeback fees, assessment fees, and monthly or annual fees, are a common component of even the best merchant credit card processing systems.
Mobile card readers provide the same advantages to brick-and-mortar retailers as they do to mobile sellers. The following types of mobile enterprises can benefit greatly from using card readers for their merchant services:
- Pop-up shops
- Food trucks
- Vendors’ booths at festivals and farmer’s markets
- Plumbers, electricians, and other contractors
Mobile card readers provide a more cost-effective option to fixed-installation card readers for businesses like restaurants, stores, boutiques, and markets. Using card readers that are compatible with the mobile devices they use on a daily basis, a large number of SMBs have begun accepting payments in temporary or makeshift locations. This trend is only expected to continue, according to experts. Recent calculations estimate the current value of the mobile card reader market to be $10 billion, with projections showing that it will grow to $65 billion by 2032.
Mobile app payments
Apps — short for applications — can be downloaded to a mobile device and used for a variety of purposes, including digital payment processing solutions. Many stores can start taking mobile app payments immediately with minimal changes to their payment procedures, allowing customers to use their phones instead of cash or credit cards.
Direct access to bank accounts is a standard feature of many mobile payment apps. A customer’s preferred source of payment, which can include one or more bank accounts, is requested during the account creation process. When this customer makes a purchase, their connected checking or savings account is immediately debited the appropriate amount.
With some mobile payment apps, users must first fund their mobile app account with money from their bank. Then, money is used from this funded account to pay for transactions after they’ve been finalized.
Mobile payment apps are designed to function autonomously. But these days, there are a plethora of apps that can sync up with retail POS systems and/or card readers. The advantages of processing monetary transactions using mobile apps include:
Speed: When a customer pays using a mobile payment app, the transaction is usually completed instantaneously, and the money is transferred into the business’s bank account within a few days.
Tracking: The usage of mobile apps allows for the tracking and analysis of inventories, as well as the detailed actions of customers. Most SMBs finds this tracking feature to be very useful.
Loyalty program integration: Businesses can save money by linking customer loyalty programs to accounts through mobile apps, instead of making clients carry rewards cards. The convenience for the consumer, as well as the retailer, is a win-win.
Convenience: Since completing a mobile payment only requires a few taps, this method can help customers who already have accounts complete transactions rapidly. This has the added benefit of smaller line ups and faster checkout time.
Cost savings: Mobile payment apps are cheap, easy to use, constantly accessible, and require no additional device setup.
An SMB just needs to create an account and make a few required deposits in order to begin accepting mobile payments. Fees for accepting payments from mobile apps tend to range from 2% to 4% of a transaction’s value. Transactions requiring the keying in of information, cross-border payments, or enhanced fraud protection may incur additional expenses.
Certain card readers can be configured to accept payments online through digital wallet payment apps, giving companies additional options for how they receive funds. Consumers can then pay using their smartphones, by simply holding their devices close to a retailer’s scanning device.
Security is a top priority
When making sales by accepting payments from mobile apps, businesses can conceivably open themselves up to viruses, hacking, and fraud. While it’s true that these are legitimate concerns, it’s important to note that top-tier mobile apps have robust security measures in place to safeguard the users and companies these apps support. Financial data is usually encrypted or tokenized for safety purposes; methods such as encoded keys and algorithms are used to make financial data unreadable to outside parties.
With public health becoming a greater priority for small businesses everywhere, contactless payment solutions enabled via mobile apps are growing in prevalence. With mobile payment apps, there’s no longer a need for consumers or employees to exchange money or cards, and shoppers can skip in-store touchscreens and touchpads altogether. A buyer can instead enter their payment details on their own device.
Payment processing systems optimized for mobile devices can be extremely useful for consumers who prefer not to carry cash, yet never leave home without their smartphones. Given the explosive growth of smartphone use, this is a particularly attractive option for SMBs. As of 2021, almost all Americans had a mobile phone. Moreover, about 85% of these were smartphones. This is a significant jump from 10 years prior, when just 35% of adults had access to a smartphone.
With the proliferation of smartphones, it’s expected that the number of individuals utilizing mobile payment apps will only increase, ultimately transforming these apps into one of the best eCommerce solutions available. Digital payment industry researchers predict that the size of the global mobile payments market will increase by 36% by 2030, from its estimated value of $52.21 billion in 2022. Companies that don’t enable payments from mobile apps are missing out on a huge opportunity to expand their customer base and revenue.
For small- and medium-sized businesses that want to offer new payment options to their customers, Sekure Payment Experts can help with our worry-free payment processing. Call, email or chat with a Payment Expert right now.