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Summer 2011 Making Mobile POS Work

Mobile payment technologies make it easy to process payments on the road. Here’s a list of what factors to consider when shopping for one.

Businesses are constantly searching for ways to reduce costs and improve revenues—and it’s one of the reasons why mobile payment technologies are increasing in prominence and availability. Mobile payment technologies can provide incredible value because they offer immediate business interactions from almost anywhere. Mobile payments can expand your sales channels by helping you meet customers where they are.

For midsized companies in particular, with a greater number of full-time employees and a higher volume of sales, the flexibility to process every sale remotely is essential. Many small and midsized business owners have remote sales channels—making service calls in the field or attending trade shows. They may also have several retail storefronts. But having mobile sales personnel accepting payments remotely; or roaming sales clerks on the retail store floor processing sales on the spot, kicks things up a notch and can be important to building customer loyalty and satisfaction. Mobile technologies allow retailers to do just that; they speed up payment and allow customers to interact with you wherever they are, on their time—all the time. Simply put, making it easier for customers to hand over money is always a good thing. Hassle-free transactions are a powerful purchase motivator and loyalty builder, as the success of Apple’s iTunes Store has proven.

The cell phone as payment processor

“Mobile POS [point-of-sale] allows small business owners—from handymen and artists, to hairdressers and plumbers—to take payment immediately, in person or over the phone,” says Kneko Burney, president and chief strategist at the strategy analytics and consulting firm Compass Intelligence. “This is an excellent example of how practical, simple mobile applications can actually transform how a small business operates on a day-to-day basis. It’s just a matter of making these applications more accessible to this market.”

Processing mobile payments is extremely easy. The cell phone is already well understood, so converting a personal mobile device into a payment device can offer a great deal of convenience and flexibility.

Until recently the use of mobile POS, or mobile payment systems, has been confined to larger companies and those with a particular operational interest in the technology—like restaurants.

In the last few years, the advent of new smart phone applications, or “apps,” and an improving infrastructure for handling the transactions have made mobile payments more attractive than ever to small businesses and startups. Here are some things to consider when deciding to invest in a mobile payments system.


Security and Payment Card Industry (PCI) compliance are vital considerations when evaluating any type of payment product or service. Some experts point to security concerns as the biggest drag on the uptick in mobile payments. Small businesses must make sure they have a basic understanding of the technology behind any new setup they implement before allowing sensitive consumer data to pass through it. Often, and especially when it comes to computer technology, people with an interest in breaking security are more tech savvy than information technology (IT) staff within small businesses. Find a provider that is PCI compliant, and who places a high priority on the security aspect of mobile payments.

Your first filter when shopping for a mobile payments provider should be to look for one that is PCI compliant. PCI compliance is an important “badge” when evaluating any type of payment product or service.

But PCI is just a label. Much more important is the actual security, starting with the small card swipe device that plugs into the audio jack of the smart phone (the audio jack is your second filter). If the card swiper is not encrypted, stay away. Electronic surveillance devices or malicious software could make their way onto your phone to intercept and instantly transmit your customers’ credit card numbers for criminal use. Your businesses financial exposure and reputational risk are just not worth it.

The third filter when shopping for a mobile payments product is the app. Software-based encryption is important in ensuring that a keystroke-logging virus will not transmit credit card numbers. Make sure your provider is a commercial payments expert.

Many smaller software shops create payment apps without a full picture of the complex payments process, which could result in serious vulnerabilities for your business. Be aware that the field of mobile payments is still a nascent industry.


Less than a year ago, credit card terminals could cost as much as $500, not including the Internet connection or other costs. Since then, things have changed quite a bit, making mobile payments a more viable option for businesses of virtually every size.

It is important to understand your mobile payments fee structure. Some vendors offer a seemingly attractive “no monthly fee” option, but each transaction is like a roaming fee. Those vendors tack on an extra one percent or more against the transaction size, to the point where the fee structure at its lowest is 2.75 percent, and at its highest is 3.5 percent—an extra premium of more than 1 percent. On a $1,000 transaction, a 2.75 percent surcharge is $27.50 in fees, which is $10 or more than the standard merchant rate using a traditional credit card terminal.

Your fourth filter in shopping for a mobile payments provider is to seek out plans with a reasonable monthly fee and no
additional markup on the transaction fees; it is never a good idea to pay for roaming.

Small business options

The fifth filter in shopping for a mobile payments provider is to watch for “smoke and mirrors” apps. For example, you can download a lot of payments apps in the various app stores, but once they have been paid for and downloaded, all you have is the app. You must still find and pay for a separate merchant account compatible with that app.

A mobile payments app is like a paper check, and a merchant account is like a checking account. If the paper check is not linked to a checking account, it will not work. The same goes for a payments app; it needs to be linked with a merchant account. You can save yourself some time and confusion by buying a “bundled” solution, including the app, card swiper, and a merchant account, from a reputable payments provider.

Also, strongly consider a mobile payments product that will automatically flow data into your accounting or other back-office business management systems. Data automation is a critical component to the bright future of mobile payments in the business world. After all, why go high-tech and wireless if you must still print and manually enter receipts in your accounting software at the end of the day?

Competition is good with new vendors entering the mobile payments market almost daily. This is good news for small businesses, since competition usually brings lower prices and can be a powerful incentive for innovation. This is an exciting time for specialty retail and mobile payments is one reason why.

Greg Hammermaster

Greg Hammermaster has more than 23 years of experience in banking, payment solutions, and business software applications. He is president of Sage Payment Solutions, Sage's payments division for North America. He speaks at payments industry conferences, and is currently on the board of Commercial Payments International.

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