How to Let Customers Pay with Their Smartphones
by Tim Parker
Accepting payments from your customers' smartphones is a smart move for your business. Here's what you need to know about the mobile phone payment options available today.
Image source: Photospin.com
If your customers aren’t asking already, they will. Doing business with smartphones is likely to become the standard in coming years and as a small business owner, you better be ready when the masses show up with only a phone as a way to pay.
You Have to Change Anyway
The last thing you want to do is invest in a technology that may or may not catch on. It’s not like mobile payment is wiping out traditional payment methods but the good (or bad) news is that you have to invest in new equipment anyway.
Most business owners know that as the United States switches over to EMV credit cards, they have to invest in new card readers anyway. During that switch, merchants can pay a few extra dollars to purchase a card reader that has the technology to accept mobile payments. Experts in the field say that the cost is relatively low—about $250 per payment terminal.
RELATED: EMV Chip Credit Card Processing Guide
Businesses have until October of 2015 to make the switch. That’s when credit card companies are supposed to shift liability for fraudulent technology from themselves to the company with the most antiquated equipment. If you fail to upgrade before that date, you will likely be the one who pays for the fraudulent transaction.
There are plenty of articles online that review the various payment terminals but for small businesses with a relatively simple system, your point of sale company will have plenty of valuable information to offer.
How Do I Sign Up?
There are a number of mobile payment options available to you. Apple Pay is the most talked-about, largely because of Apple’s massive marketing engine, so let’s look at it in more detail. Once you upgrade your equipment the sign up process is easy. Your payment provider will set up Apple Pay for you. Apple Pay accepts Visa, MasterCard, and American Express cards and there is no additional fee for using it. Just the normal merchant fees you were already paying.
RELATED: Merchant’s Guide to Apple Pay
The customer’s payment is charged as a card present transaction and all of the current rules regarding fraudulent activity apply. Remember those rules will likely change in October of 2015.
To process a return with Apple Pay, it could be as easy as the customer tapping your payment terminal with their phone. In other instances, you may have to manually process the return but all you have to do is ask the person for a number in the Passbook app of their phone.
If you have a rewards program, Apple Pay will not currently link with it but the company has promised that when it releases iOS9, you will have that option. Of course, you will probably need a programmer (called a developer in the computer world) to help with that.
You can already integrate Apple Pay with your app if you have one, but again, it will take a developer to help with the integration unless you have those skills yourself.
For more information about integrating Apple Pay, read more here.
Hats off to Apple for making you think Apple Pay is the only way to accept mobile payments but it’s not. Another lesser known way is the upcoming Android Pay. Much like Apple Pay, customers can use their Android-based phone to pay using their NFC-enabled payment terminal.
As of now, companies like Best Buy, GameStop, jetBlue, Macy’s, and McDonalds will accept Android Pay. Because Android and Apple Pay work with the same technology and setup is the same for both, you can accept both payment systems without any financial outlay. The only challenge is training your employees on how to accept payment options from the various devices.
A Little Lower Tech
“Mobile payment” doesn’t just involve using your smartphone. Paying outside of a traditional credit card terminal is still commonplace especially among small business owners. PayPal Here uses PayPal along with a card reader you plug into a mobile device to accept and process credit card payment. Square and Intuit Payments are two other options but as the U.S. moves to EMV technology, these payment types will have to evolve.
Square saw it coming and designed a new reader to process chip cards and others will certainly do the same.
What About Security?
According to most security experts, you have nothing to worry about with mobile payments. Even if a hacker could find a security flaw in the software, iPhones have a chip embedded in the phone that protects against malicious use. Each time a customer uses Apple Pay, the phone generates a one-time use code for transmission instead of sending the credit card number. (Called tokenization among mobile pay experts.) Even if somebody intercepted this code, it would be useless to them.
Of course, hackers will try and likely succeed at some point but currently, experts say not to be worried.
Wallets will likely be a thing of the past not far into the future. Cell phones are the payment device of the future. Admittedly, Americans aren’t adopting mobile pay as rapidly as companies like Apple and Google would like but look for adoption to speed up once more businesses, like yours, install NFC readers and the process becomes more mainstream among consumers.
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