Smartphone Payments. Good Or Bad?

Technology is impossible to keep up with so should your business provide a mobile processing option?

  I know what it is like to be frustrated and confused, heck, even after 8 years in the processing business there is still plenty of information that confuses me.  There has been a lot of talk about the new processing medium of business owners using smart phones to collect, process, and complete financial transactions.  There are a number of solutions available but Square has by far led the pack in the headlines.  So I want to look at some of the confusion out there so you can make the right choice for your business by answering questions like:

What is the difference between Square and a traditional merchant service account?

How secure is it?  Am I protecting my customers?

How can this benefit me?

Cost what is the low down?

There is a lot of confusion out there regarding the first question so;

What is the difference between a Square account and a traditional merchant service account?

  It is my opinion that the simple answer is NONE.  To attain an account you still have an application process that yes will include a credit check, have transaction limitations, and user responsibilities.  The main difference is that with Square has loosened the underwriting requirements and replaced that with account restrictions such as withholding funds and deposit times to make sure that transactions are not fraudulent etc…. 

They charge 2.75% for transactions which is (in my opinion) high for most business owners but reasonable for people looking for a solution for person to person transactions.  This is a great rate and simple solution for any business that does relatively few transactions (less than a $1500/month).  For any business doing more than  $1500/month or any business that for cash flow reasons requires their deposits within 24 hours you are much better off with a traditional Merchant Service Credit Card Processing account.  For instance, since it is not possible to speak for the industry as a whole, if you were to take an average of all the accounts in The Merchant Doctor’s portfolio with all fees included you would find that our merchants pay an effective rate of about 2.15% or less, receive their deposits within 24hrs, have dedicated service reps 24/7 with no (or very low) hold times, fully encrypted equipment, and the Merchant Doctor to fall back on if there is any issue.  The down side to the traditional Merchant account is that you have to indeed be a Merchant selling something of legal and tangible value to get approved for an account whereas with Square you can be anyone selling anything. 

Is Square right for your needs?

I believe that the original intention of Square was for the extremely small merchant who sells goods at remote locations (like craft fairs) or for citizens who want more productive garage sales.  In today’s world you will find that most businesses would be crippled without the ability to accept their piece of the well over $2.5 trillion in credit card payments over the last year - to do so this requires a more stringent structure than that offered by Square.  Also many are or have lost trust in Square as a product since it is a device that without encryption it is allegedly very easy to modify into a skimming device.  Most major card service providers offer fully encrypted PCI-DSS compliant phone processing devices.

In Summary accepting mobile payments or smart phone payment technology is the fastest growing sector of the payments industry and can greatly benefit your business.  However, in this constantly changing world of high tech and high tech theft we need to make sure that we as an industry and you as the business owners of the world take responsibility and work together to promote responsible payment processing.  Not doing so benefits no one.  So work with a professional, care about your customers, and don’t be afraid to ask questions.

The Merchant Doctor encourages your questions and comments below please take a moment leave your thoughts.

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