Apple Pay has gained popularity in the last few months with the introduction of the iPhone 6 and iOS 8. It joins the long-existing Google Wallet as a viable transactional currency at both brick-and-mortar and online storefronts. However, the debate over whether it’s a good fit for small business is just heating up.
Below are some important things to know about mobile payment methods and how they can affect you and your business.
How Do Mobile Payments Work?
Both Google Wallet and Apple Pay work over a wireless connection or near field communication (NFC). Apple Pay is available on iPhone 6 with iOS 8.1 and can be controlled with the auto-installed Passbook app. Google Wallet is supported via Android devices running KitKat 4.4 or higher.
For both payment options, the information that is transmitted to the retailer at the point of sale is tokenized, meaning sensitive details (e.g. passwords, PINs, account numbers, etc.) are replaced by symbols that translate through a back-end system into specifics. This tokenization makes mobile payments a relatively secure option, as the consumer is not sharing any sensitive data that could be stolen via data breaches that have become more widespread in the past few years.
In order for a retailer to accept mobile payments, its point-of-sale (POS) device must have NFC technology. Depending on the age of POS terminals, the technology could already be included. However, for some retailers that have not recently updated their POS terminals, conversion to mobile payments may require an upfront investment in new technology.
5 Factors When Considering Mobile Payments
As a small business, it’s hard to know when it’s time to make an upfront investment in new technology or to adopt new processes. Below are five factors to consider when debating whether or not to adopt mobile payments.
1. Transaction Fees Are Similar to Current Credit Card Transaction Fees
Small business owners are very familiar with credit card transaction fees, which typically average 2% per transaction. This fee is paid to the card issuer and helps banks facilitate credit and cover costs related to fraud.
All indications are that mobile payment transaction fees are the same, although it’s been hinted that Apple may be looking to increase its fee schedule with banks. In the long run, this increased cost could trickle down to retailers, making it less cost-effective for small businesses.
2. New POS Terminals Are an Added Expense
As explained above, mobile payments work via a wireless connection (NFC) that requires specific hardware in order to work. In many cases, it might be easier for small businesses to adopt mobile payments since the internal process to adopt new technology is normally easier and quicker. However, if a business’ operational budget doesn’t have a line item for upgraded technology, it might be difficult to find the money before the next fiscal year.
3. There Is an October 2015 Deadline Looming
MasterCard and Visa, two of the largest credit card companies in the world, have set an October 2015 deadline for U.S.-based businesses to replace their current swipe-and-sign card readers with newer EMV-enabled machines. These machines will be able to read microchips embedded in credit cards, and they’ll be secured via a PIN rather than a signature.
This update will allow credit card companies to transfer charges related to fraudulent transactions to either retailers or banks. Small businesses not adapting the new EMV technology will become liable for any fraudulent transactions. As such, if small businesses are required to replace their POS devices to accommodate this new technology, they might as well replace them with ones that are also outfitted with NFC to enable mobile payments.
4. Increased Security Makes Mobile Payments Attractive
With tokenization, mobile payments are considered more secure than credit card swipes. Data breaches at large retailers like Target and Home Depot have raised the visibility of how unsecure credit card payments can be, giving mobile payments an added boost when stressing security.
However, detractors of mobile payment options will use recent high-profile cloud breaches, namely of personal photos of celebrities, as examples of how mobile is still vulnerable.
5. Technology Adoption Benefits Your Brand
Consumers take many different factors into account when choosing to do business with retailers. One of these factors is technology.
A viable website, mobile site or app, and responsive customer service are all important elements of a business’ technology profile. Adopting mobile payments and making it known among consumers will further elevate the consumers’ opinion of the company and its commitment to remain on the cutting edge.
Soon, small businesses may not have the choice to accept or deny mobile payments. As consumers continue to rely more heavily on their mobile phones and companies continue to develop new technologies to exploit this dependence, retailers will have to adapt or risk being left behind. However, that doesn’t mean businesses need to adopt this new payment technology blindly. By staying ahead of the trend and keeping in mind the five factors above, small businesses can join the mobile payment movement with confidence.
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