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Mobile Merchant Payment Systems

Cash is king. Or so it was for millennia. Not until the 20th century did checks become popularized and employed by ordinary citizens. And even more recent is the mass adoption of credit and debit cards. I’ll spare you the history lesson of bartering with goats — suffice it to say, humans continually search for more efficient and reliable methods of paying for goods and services.

Not long ago accepting credit cards (sometimes called merchant services) was a privilege reserved for large, established businesses. Forced to navigate complex and expensive hardware and network requirements, many smaller business owners opted out. But in today’s world, setting up your entire credit card processing system takes less time than grooming that prize goat. With a smartphone or tablet, card swiper and bank account, anyone can accept credit or debit cards wherever there is Wi-Fi or cell connectivity. The most challenging task is determining which service fits your business while leaving you with the most cash after the processing fees. (Hint: read the fine print.)

This new breed of merchant provider uses four methods to get compensated for their services: hardware costs, monthly fees, per transaction fees, and per transaction percentages. And each of the four major players — Square, PayPal, Intuit, and most recently, Amazon — take a varied approach.

Square was the first company to pioneer the card swiper that plugs into your smartphone’s audio jack. Through the magic of turning numbers into audio waves and back again, they allow a plastic gizmo smaller than a postage stamp to be your gateway to untold riches. Square gives you the reader for free, has no monthly charge, and only subtracts a 2.75% fee per transaction. That is, if the card is present and you “swipe” the sucker. If you manually enter the card number, then it’s considered a “keyed transaction” and due to the supposed risk of fraud, incurs a higher 3.5% plus a 15¢ transaction fee. Bummer. But in most retail environments the shopper presents their card and the lower fee prevails. Square offers decent turn around in depositing your cash within 1-2 business days. Not too shabby.

Next to hop into the fray were PayPal Here and Intuit GoPayment. Each provides a free reader and competitive per-swipe transaction fees. But they complicate the process with monthly fee options and sliding scales of cost depending on a litany of subtle variables. The tradeoff is both bring their own killer feature. Intuit GoPayment gives you direct QuickBooks integration and PayPal Here woos you with their installed base of existing PayPal spenders. Another PayPal selling point: they’ll transfer your money instantaneously to a free debit card. With no 2-day cooling-off period and 1% cash back for your debit card purchases, you get a slick way to recoup some of those stinky fees.

The newest contender is Amazon, known for leveraging their scale and disrupting markets. In contrast to the others they charge $10 for their Amazon Local Register swiper, but they’ll credit that back against your first transaction fees. Their fees are also significantly lower — at least at first. Signing up before October 31st grants a 1.75% transaction fee until January 2016. Following this 14-month Shangri-La, they plan to continue mildly undercutting the market with flat 2.5% for swiped and 2.75% for keyed transactions.

The greatest news for business owners is these four juggernauts should continue under-charging and out-innovating each other creating ever more streamlined ways to capture that elusive buck. And let’s face it; all of this beats keeping tabs on the global G.E.R. (Goat Exchange Rate).

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