Taking a swipe at mobile pay: Small businesses find that mobile credit card swipers really pay off

If you’ve been out at a local restaurant and had your waitress come by with an iPad affixed with a credit card “swiper,” you’ve witnessed one of the tools available to help small businesses collect payments faster and more reliably.

Mobile point-of-sale services enable merchants and consumers to accept credit cards on their iOS or Android smartphones and their tablet computers. Consumers like the convenience and the opportunity to avoid the billing process, and merchants appreciate benefits like the improvement in cash flow that comes with capturing payments on the spot.

Beth Korth, senior vice president and director of treasury management for First Business Financial Services, says mobile merchant processing devices are used by many small businesses, including what she called micro-businesses, “where they are going to be at an event and they want to provide goods or services, and it’s appropriate at that time to collect payments. This technology allows them to capture that payment almost anywhere business is being transacted.”

In this consumer report on business technology, we asked a variety of small business people about their mobile payment systems, which often come with inventory management, timecard, and other functions provided by third-party vendors. It is by no means an exhaustive review because there are numerous mobile point-of-sale (POS) systems on the market, but it does include the impressions of local merchants who use them to either replace or complement older credit card terminals or cash registers.

Square deal?

The market leader appears to be Square Register, which was developed with encrypted security by the San Francisco-based Square Inc. It is featured prominently at neighborhood restaurants like Ian’s Pizza’s original location on Frances Street.

Owner Ian Gurfield called Square Register software “very easy” to program and very intuitive. At Ian’s Pizza, a plastic dock (aka the Square reader) is simply plugged into the audio jack of the tablet, credit cards are swiped through the reader, and the software does the rest. “It’s incredibly easy to use, and it works really well,” Gurfield said. “It’s a very quick and cost-effective solution for small retail businesses.”

How cost effective? After an initial $600 investment, including the purchase of an iPad, Ian’s Pizza is assessed a flat 2.75% per-swipe fee, which is applied to the price. If the merchant has to key in an entry, the fee is 3.25% of the transaction price. So far, Gurfield said, the fees have not been onerous; in fact, when Ian’s Pizza switched to Square Register two years ago, it saw a decrease in processing fees compared to its previous POS system, which consisted of an old-school cash register with a credit card terminal.

“That’s what I really like about Square,” Gurfield noted. “If you’re dealing with a traditional credit card processor, they can’t even tell you what their fees are because it’s so complicated.”

As for what customers think, Gurfield has heard no complaints. “They seem to like it,” he said. “If you pay with a credit card, you don’t have to sign a slip, and you don’t have to search for a pen. They just press the screen. It couldn’t be simpler.”

While Gurfield touts the product’s usefulness, he also notes limitations that have to do with scale. “If you had a very large restaurant with multiple POS terminals and lots of printers, it’s not good for that,” Gurfield stated, “but one day, Square Register could work in that setting.”

Another downside is that customer support is not very fast, at least from the staff vantage point. “I’ve never had to deal with it directly, but I know that some of our folks have tried to call them and get some questions answered, and it takes forever to get somebody on the phone,” Gurfield said.

Yet another worry is the long-term sustainability of Square’s mobile payment line of business. He noted that Square had to abandon its previous credit card processing deal, which was very advantageous to small businesses. “They had a phenomenal, incredible credit card processing deal for small businesses, where they charged a flat rate,” Gurfield noted. “It was like $275 a month for up to $250,000 in credit card processing. It’s one of the reasons that we went with it, and unfortunately they could not afford to offer that program anymore.”

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Gurfield isn’t the only merchant with praise for Square Register. Ben Dreyer, owner of Melt, a Madison health and fitness studio, also lauded its ease of use, and noted that Melt chose Square Register after deciding to redevelop its website. “One of our goals was to seamlessly integrate our payment system, and Square Register allows us to do that,” he said. “We were able to set up an online store in under 30 minutes, and now it’s a much better user experience for customers. We wanted them to have the option of payment online or in person.”

Square, which hooks up with the studio’s smartphones, is a synergistic fit with the studio’s business model, Dreyer added. Melt hosts different practitioners, ranging from trainers to massage therapists, who are independent contractors with their own small businesses. When Melt redeveloped its website, it wanted to assist their marketing efforts, so the studio created home pages for each of the trainers that link to their individual online stores and to their Facebook or LinkedIn pages. Customers can make payments directly to the practitioners.

“We just wanted to make the customer experience and the trainer experience as seamless as possible,” Dreyer explained, “and of course a lot of people prefer to pay with a credit card. It has helped cash flow because people are able to do it on their own time, and they are able to utilize their online store.”

Scott Staples, owner of Du Hair, a boutique hair salon, says Square Register provides service flexibility. Since he processes transactions on his smartphone, he can save clients a trip by delivering shampoo and other products to their home or office and accept payment right there. “So I have more mobile capacity,” he says. “If somebody needs a gift certificate, I can easily process the gift certificate over the phone as well.”

Staples also likes the green aspects of using Square Register. The service enables him to save paper by emailing or texting receipts, and he appreciates the fact that it’s compatible with most major credit cards. That includes American Express, which a number of his clients use.

Paying it anywhere

Dr. Nick Hellenbrand’s chiropractic office does not accept insurance, and as a cash-only practice, it relies on PayAnywhere, a mobile payment system developed by North American Bancard.

Hellenbrand Rabideaux Chiropractic can be a cash-only practice because its charges are modest — $35 for an alignment and $50 for a full exam. At the moment, roughly one-third of its transactions are paid by credit card, one-third by check, and one-third by cash. For Dr. Hellenbrand, it made sense to go with PayAnywhere because it does not charge a monthly fee. In doing the math, the practice found that it would save money by going with PayAnywhere because its credit card volume is lower, it would end up paying less per month, and it did not have to worry about buying equipment. The practice uses PayAnywhere on an iPad, which it had already purchased.

“What’s really nice is that if you are selling something, you can add in the items,” Hellenbrand says. “You click on it, and then it adds the item to a shopping cart and it runs up the total, which is nice because you don’t have to manually enter in the price or calculate it ahead of time and enter in the total amount like you do on some stand-alone terminals.”

That’s important for a small practice where chiropractors have to do a little bit of everything. Dr. Hellenbrand has used stand-alone terminals at other jobs and finds PayAnywhere just as quick, if not quicker, in getting people checked out and on their way.

“One of the big benefits is that you can go pretty much paperless,” he added. “You can email receipts right from the iPad to the patient, so you’re not printing something out and dealing with all that wasted paper.”

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PayAnywhere definitely helps with cash flow because the payment is electronically deposited the next day. The swipe fee is 2.69% (higher for keyed-in transactions), and swipe fees for PayAnywhere Storefront, a newer system for small businesses with a very modest volume of credit card business, start at 1.69%.

Hellenbrand has never had a problem with PayAnywhere accepting any credit cards, and he praised the customer support. “I’ve only had to call in two or three times for support, and the call waiting times are very short,” he said. “You’re speaking to somebody quickly, my issues have been resolved within that one call, and they send you an email confirmation.”

Data encryption and tokenization provide security, but Hellenbrand issues one note of caution pertaining to scale — if you do a large volume of credit card business, PayAnywhere is not the right system. “You have to look at where your break-even point is,” he advised, noting that his break-even point is about $60,000 in annual credit card transactions. “Right now, we’re getting toward that point where if you went with another system that had a monthly fee, eventually it would be cheaper because you’re paying less of a percentage.”

ID-ing tech and partners

Mobile payment technology is also used by more established businesses that have service providers in the field, such as firms in the construction trades or plumbing and HVAC contractors. Benjamin Plumbing puts ID Tech swipe readers in the hands of its service team, which allows them to collect payments at a different kind of POS — the point of service.

That’s good for cash flow and customer convenience, according to Sue Thompson, office manager for Benjamin Plumbing. The company uses the mobile system for its service people and a stationary POS system in its showroom, where it sells plumbing fixtures and parts to home improvement do-it-yourselfers. Thompson had high marks for IT Tech’s ease of use and noted the least expensive credit card transaction is when consumers swipe their cards.

“Consumers get a discount if they actually swipe the card,” she noted. “If they take the information and key it themselves, it costs a penny more per transaction, so it’s always better to swipe the card, both from the security standpoint and from a cost standpoint.”

For mobile credit card payment processing, Benjamin Plumbing has a partner in Wind River Financial, and ID Tech is the manufacturer of the encrypted magnetic stripe readers that

Wind River Financial uses for its mobile product. According to Dan DeBraal, business services consultant for Wind River, clients purchase the hardware from the client company and download the application into their smartphones. “We do charge to process credit cards for all of our merchants, regardless of the product they are using to collect the transaction sales data,” DeBraal noted.

Wind River also monitors how the system is working for clients, in essence co-managing the program, so entering into a mobile payment partnership was an important decision for Benjamin Plumbing. “The most important thing is security,” Thompson said. “The responsibility of a business is to protect the customer’s information, and getting it from a customer to the processor as quickly as possible in the safest manner has got to be number one.”

Leafing through

Cosmas Skaife of Rosie’s Coffee Bar & Bakery in Monona admits to frustrations related to her use of Leaf for mobile POS, some of it the fault of the cloud-based Leaf system and some the fault of spotty Internet service. Her buyer’s remorse is evident as she lists the pros and cons.

Leaf runs on Android tablets and has a lot of nice features, including a built-in card swiper. The technology came with the coffee bar’s menu loaded in, but sometimes when Skaife presses a button for customer ordering, it doesn’t take hold until she has pressed it several times. The system programs almost everything, and she can usually call and get a problem fixed, but she openly wonders whether the product can scale.

“If you are really busy, maybe you would not want that system because it could slow you down,” she stated.

In her first year of business, Skaife has rarely had an issue with the system accepting a credit card. However, she doesn’t quite trust Leaf enough to use other applications that come with it, including timecard and inventory solutions. The constant software upgrades have caused some occasional problems with working the system, and she would appreciate local customer support. The company, which is based in Cambridge, Mass., provides an hour-long instructional video to customers.

As for the investment, the coffee bar got the system up and running for $2,400 (four stations at $600 each), which Skaife found reasonable, and Rosie’s pays Leaf a $50-per-month fee. “One thing that is cool is that I can text or email receipts, and if I paid extra, there’s an app where I could take PayPal, which I don’t yet do,” Skaife said. “If I wanted to pay extra, I could also do a gift card magnet swipe, but it gets pretty expensive if you sell a lot of gift cards.”

Skaife appreciates the platform’s robust security, which represents light years of advancement from when she started in the restaurant industry. “There is no way,” she says, “that anyone who would hack into my system is ever going to see credit card numbers.”

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Watching Over Them

Mark Taber doesn’t mince words. The president and CEO of Wind River Financial says the company saw an opening in mobile payment processing because of customer service problems at other providers. Wind River management thought one reason for poor customer service was that relationships faded after the deal was closed.

Various point-of-sale systems interface with Wind River’s payment gateways, which deliver transactions for authorization on behalf of merchant clients. But Wind River’s calling card is what happens after the handshake, especially as solutions become more complex.

“Today, different businesses have multiple sources of accepting a payment,” noted Taber, who credited co-owners Mark Courchane and Matt Uselman for developing this line of business. “They are tied to their inventory systems, their billing systems, their payroll system, and tips. The complexity of how a payment is accepted is probably ten- or twentyfold over what it was 10 years ago.”

Dan Debraal, business services consultant for Wind River, noted that after-the-sale service is especially important when technology is involved. The sheer number of upgrades and new product iterations demands a higher level of post-implementation support. “You have to manage it in a proactive manner so that as businesses change and grow, and as technology changes, we’re helping customers with the next transition,” Debraal said. “It can’t be about them calling us, it has to be about us being proactive in our approach to helping them.”

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