Intuit is one of the leading providers of payment solutions to small businesses. I’ve asked them to provide some insight to us on the world of mobile payments.
Mary Lunneborg, the author of this guest post, is Senior Product Manager of Mobile Payments at Intuit. In her role, Mary leads the strategic direction of GoPayment, Intuit’s flagship mobile payments offering. Previously, Mary worked in product management on the Quicken Mobile team at Intuit, developing innovative mobile web experiences for users of the personal finance software Quicken. When she’s not thinking about mobile payments, you may find her hiking in San Francisco with her two-year old daughter.
My grandparents paid the florist with dollars and cents; my parents paid by check; and now I pay my florist right on his iPhone. Like the rest of small business day-to-day operations, payments have been revolutionized by technology. Thanks to smartphone apps, small businesses can process credit card payments right on their phones.
Before the dawn of mobile payments, small businesses relied on four ways to get paid on the go:
- Only accept cash or check. Of course, checks require deposit and clearance, so they can bounce and delay cash flow.
- Write down credit card information, then call or travel back to the office to process the card – not the most secure, accurate or professional method.
- Tote and use an imprint machine, which delays processing, requires schlepping hardware, and is again not very secure.
- Or carry and use a wireless terminal, which can cost small businesses thousands of dollars in equipment rental fees and can be cumbersome to carry.
None of the four methods was really ideal, and none really got the job done. In a survey we here at Intuit distributed to 761 business owners, we found that small businesses average about $1,500 in overdue customer payments per month creating a $33 billion collective strain on cash flow for 22 million small businesses in the U.S. We also learned that overdue payments keep 42 percent of small business owners up at night. This past-due problem not only represents a big stress factor, but also impacts businesses’ bottom lines in a very bad way.
However, disrupted cash flow and sleep deprivation still don’t seem to push the 70 percent of small businesses who do not accept credit cards to begin accepting them. Why? More often than not, the perceived costs of the processing equipment and transaction fees offset the benefits to small business owners. But, what you may not know is that credit card processing can be affordable without sacrificing security. The answer lies with mobile payments processing.
How mobile payments work:
To process a credit card on-the-go, all you need is a mobile phone, a mobile payments app, and a merchant account. Most mobile payments apps are free, so if you already own an app-supported cell phone, set up is much less costly than with wireless terminals. While service fee structures vary amongst providers, you will typically pay a flat monthly service fee, a discount rate, and a per-authorization fee – both of which apply per transaction. To get up and running, you will need a merchant account, which entails a brief application. Check out different providers to see what cost structures they offer. For example, our mobile payments application, GoPayment, is an end-to-end solution, so we take care of everything from the merchant account setup to transaction fees. And because we make QuickBooks, it also syncs your GoPayment transactions with your books so you don’t waste time re-entering data. It’s also worth looking into your provider’s security policies to make sure you are investing in a trusted company, that there are not any hidden fees and that your transactions and customer information will be kept private.
Once the merchant account is set up, you can begin accepting credit card payments. You simply enter the amount to be charged and the customer’s card information (or swipe the card with a Bluetooth or plug-in swiper), receive authorization, and then you can email or text a receipt to the customer. You get paid in seconds.
Ultimately, costs associated with mobile payments processing are low and return on investment is high. In fact, nearly 40 percent of small businesses that accept credit cards state that they are making more money because they give customers the option to pay with plastic and reduce the chance of bad debt.
Challenges Today and Looking Ahead to Tomorrow
As with any new technology, especially one involving financial transactions, mobile payments has not yet gained popular market acceptance. It’s not yet commonplace for people to see their credit cards processed on mobile phones, so with unfamiliarity comes uncertainty about security. We experienced the same feelings of uncertainty around the advent of eCommerce in the 1990s. But, as paying for goods and services online became less and less foreign, we grew confident that the privacy and security measures in place on eCommerce websites were trustworthy.
We’ll likely see mobile payments follow a similar course, but at a faster rate of adoption since folks are already comfortable with online transactions. In fact, we’ve already seen solid initial traction in the space. Since we launched GoPayment in February 2009, business owners with GoPayment have processed more than $18 million in payments.
Looking farther down the road, past mobile payments market pervasion, we can expect innovative technologies to make it even faster, easier and more convenient to process payments anywhere. For example, there is already market chatter about text payments (i.e. credit card processing via text message), fingerprint payments, and technology that will enable merchants to take a photo of a check on a mobile device and process it instantly.