Competition to secure merchant users of mobile payment-acceptance services is on the rise. As a result, many companies have begun offering various options to appeal to small merchants.
Square Inc. initially led with way with a low-cost service, but other companies are increasing the competition by offering similar deals. But many of theirs also help merchants better manage their business, whereas Square’s does nothing more than support card acceptance.
And the added functionality could be the key differentiator to secure the merchant deal. In fact, at least one entrenched terminal maker is counting on it.
Indeed, the more features included with a mobile payment-acceptance service the better, especially if the features help merchants make more money, Adil Moussa, senior analyst with Boston-based Aite Group LLC, tells PaymentsSource.
Companies deploying mobile-payment acceptance services should focus on what they can do to meet the needs of smaller merchants, Moussa says. “Merchants will most likely pay for something as long as they see they value for their business,” he contends.
Some merchants may be content with a simple card-acceptance service such as Square’s, but others may be “more willing to pay slightly higher if the service is more personal and meets their needs,” says Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC.
Subsequently, many small merchants may consider companies that offer not only a low-cost option but also additional features that give them more bang for their buck.
One company hoping to appeal to such merchants is Troy, Mich.-based ISO North American Bancard. North American developed its PayAnywhere mobile point-of-sale acceptance service for smaller, service-oriented merchants by offering an affordable pay-as-you-go method (
North American Bancard designed PayAnywhere for merchants that do not necessarily transact every day or every month, Marc Gardner, the ISO’s president and CEO, tells PaymentsSource. Merchants pay 2.69% of each swiped sale and 3.49% for keyed-in transactions. They also pay 19 cents per transaction for debit and credit card transactions.
“Merchants do not pay any fees if they are not swiping or keying in cards. So if they have a seasonal business, they don’t pay fees during the off months,” Gardner says.
PayAnywhere works on Apple Inc. iPhones, and the company plans to extend it to both Google Android devices and Research In Motion Ltd.’s BlackBerry phones this spring.
Besides payment card acceptance, North American also prides itself on its customer service. Unlike Square, which deals with customer issues only online, North American offers customers several options when they need help, including over-the-phone service.
The company employs a team of 400 in its Detroit office to “provide immediate service to its customers and not just offer one line of communication such as e-mail,” Gardner says. “We have people here to take the calls and handle tech support, customer care, deployment and replacement hardware requests,” he adds.
The service also enables merchants to see which location or which sales representative is performing the best. It also enables merchants to see all their sales at the same time on a specific day, Gardner explains.
The additional features included with PayAnywhere are beneficial, Mike Hagen, owner of VIP Services LLC, a Detroit-based limo service and PayAnywhere user, tells PaymentsSource. The built-in reporting system is helpful because “I can zoom in on my transactions for each day, week or month either on the phone or online,” Hagen says.
Moreover, the service’s ability to integrate with the phone’s satellite global positioning system “enables me to print the exact location of the sale on the receipt and issue an electronic receipt so the customer won’t lose it,” Hagen notes. This is beneficial for customers requiring proper documentation to expense the ride, he adds.
PayAnywhere also touts an easy and quick enrollment process. “We ask a few questions, and merchants can get up and running within minutes of submission,” Gardner says.
The three-minute enrollment process includes a list of about 9 questions, which North American uses to confirm the merchant’s identity and credit screening. The company also includes the questions to make sure it wants the merchant as part of its payment community, he adds.
Also hoping to appeal to small merchants, Intuit Inc. in January announced it is offering its GoPayment mobile-payment service with free card readers and no monthly service fees to merchants who signed up by mid-February (
Participating merchants who handle less than $1,000 worth of transactions per month do not pay the normal $12.95 monthly service fee, but they will pay a discount rate of 2.7% of the sale for swiped card transactions and 3.7% for keyed-in transactions. The company also applies a 15 cent transaction fee for both credit and debit card purchases.
Merchants with transactions totaling more than $1,000 per month, however, pay the monthly fee and a discount rate of 1.7% of the sale for swiped transactions and 2.7% for keyed-in purchases, plus the 15-cent transaction fee.
“For larger merchants, the monthly fee becomes trivial because they are saving so much money on the discount rates. But for smaller merchants, which is a growing market, we are constantly looking out for them and thinking about pricing,” Andrew Freed, Intuit project manager, tells PaymentsSource.
Intuit has offered a mobile payment-acceptance service for about two years and has seen significant adoption among many mobile merchants, Freed says. But a large number of merchants could not afford the cost, “so we designed a pricing plan that made more sense for them,” he adds.
With GoPayment, consumers pay merchants immediately so they do not have to worry about “getting caught up in the pricing plan,” Freed says.
Several merchants that use GoPayment have seen about a 20% increase in sales, Freed says. For example, Vitamin Angels, a Santa Barbara, Calif.-based not-for-profit, used GoPayment to collect donations at a recent fundraiser and made $5,000, Freed says. Last year, the company only made $500, in part, because it could not accept card payments, Freed says.
Merchants using GoPayment also may view transaction histories online. They also may link transactions and data directly into Intuit’s QuickBooks software and send receipts that also include maps of the locations where the transactions occurred to consumers via e-mail or text message, Freed says.
Sage Payment Solutions Inc., a McLean, Va.-based ISO, also has tossed its name into the hat of low-cost mobile POS acceptance services.
Sage’s service includes a $50 set-up fee and a $10.95 monthly fee. Merchants, however, pay no other incremental mobile-processing charges (
The company also offers promotions to merchants already using Sage’s services for other payments-related needs such as accounting, says Greg Hammermaster, Sage president. “We may waive the swiper fee or waive the monthly payment fee for a specific period of time,” Hammermaster says.
Sage’s customers still pay discount rates, which are the same rates they would pay for nonmobile credit or debit card transactions, Hammermaster explains. “Generally speaking, most credit and debit card transactions fall below 2% of the transaction value, whereas commercial cards and rewards-based credit care are a bit more expensive to process,” he adds.
Sage does not charge any additional mobile surcharges to transaction or sales percentages. For example, some vendors may add 1% of the sale plus an additional 15 cents to 37 cents to the processing fees, he explains.
“Mobile acceptance should not be seen as a standalone profit center but as another payment capability to help expand selling opportunities,” Hammermaster says. “Our main focus for our customers is to reduce costs, increase visibility and increase revenue through a streamlined rate plan covering all payment environments,” he adds.
Sage Mobile Payments is a payment-acceptance service that offers some additional features, Hammermaster explains. For example, merchants may void and refund transactions and review their entire payments database with their mobile phone, he says.
Eventually, Sage plans to deploy customized applications for each merchant, such as the ability to separately list each item the merchant sells, Hammermaster says. Sage hopes to roll out the customized options within the next six months.
By comparison, Square, which Twitter Inc. co-founder Jack Dorsey launched in 2009, offers merchants a free card reader, no monthly fee and charges 2.75% of the sale for swiped transactions initiated with its device and 3.5% for keyed-in transactions.
The company also applied a 15-cent transaction fee for all transactions but in February dropped the fee for card-present transactions only (
As such, Square may be “extremely inexpensive for small merchants. But if you do the math compared to some other companies, they really only save half of a percent by using Square,” Double Diamond Group’s Ablowitz says.
Despite the various low-cost options available, long-established terminal companies such as VeriFone Systems Inc. that may charge higher fees are not worried about the competition.
“VeriFone has access to a broad reseller market of experienced merchant-level sales experts and has the scale to profitably compete in the market,” Scott Henry, VeriFone director of product marketing for North America, tells PaymentsSource.
Because resellers are free to customize their own pricing, they are able to take advantage of merchants’ particular needs or come up with promotions, he adds.
VeriFone’s suggested pricing plan for its PayWare mobile service is a $15 monthly gateway fee and a one-time $49 sign-up fee for merchants with existing accounts. Merchants also pay a recommended 2.75% of the sale plus 15 cents per PayWare Mobile transaction, but VeriFone allows resellers and acquirers to set their own rates. The PayWare Mobile card reader sells for $149.95 on Apple’s website, but some resellers may provide one at no cost, according to VeriFone.
In a recently revised pricing system, PayWare Mobile merchants handling less than 1,500 transactions monthly pay a suggested retail rate of 2.75% of the sale plus 15 cents, but no monthly fee. They pay $99 for the accompanying card reader.
Higher-volume merchants pay 1.65% plus a 20-cent transaction fee along with a $19.99 monthly fee and a $29 activation fee, Henry says. If the merchant signs a two-year commitment, then the card-encryption sleeve is free, he adds.
The service also includes various features such as account administration that enables merchants to remotely manage multiple devices from a single location, data encryption, daily reporting logs and geo-tagging, which enables merchants to add a geographical location to a card statement integrated with existing merchants, Henry says.
What do you think about this? Send us your feedback.
