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New mobile payment services that combine card readers with smartphone apps could be opening up a wealth of opportunities for small-business owners.
Every day, small independent traders in the UK are forced to turn away customers because they only accept payment in cash.
For many of them, the prospect of installing card readers, integrating them with point-of-sales (POS) systems and paying high transaction fees are a headache they simply don’t need – but while cash remains king for such businesses, the same cannot be said for their customers, who increasingly find it far more convenient to use debit and credit cards.
According to research from the British Retail Consortium the value of cash payments, as a proportion of all UK retail sales, fell 14 per cent over the past five years and, in 2013, accounted for less than one third of total spend.
But what if small-business owners could use their own smartphones as card terminals, allowing them to take card payments on their own premises, or from pop-up locations or, in the case of mobile workers such as plumbers or childminders, on their customers’ doorsteps?
In the past two years, that’s become an increasingly viable way for them to do business, thanks to the emergence of new mobile payment services that combine card readers, which plug directly into smartphones and tablets or connect to them wirelessly via Bluetooth, with downloadable apps, which administer transactions securely.
This new style of mobile card processing has been a boon for James Bailey, co-owner of Bailey’s Deli, a coffee shop and delicatessen based in Carshalton, Surrey. He’s using the iZettle service to bring the company’s range of specialist cheeses, cured meats and hampers to local farmers’ and Christmas markets. Being able to accept card payments, he says, encourages impulse buying among customers who aren’t carrying enough cash to cover more expensive items.
iZettle was one of the earliest-available services of this kind in the UK, launching here in partnership with EE in November 2012. Other similar services include Payleven and SumUp.
What all have in common is their suitability for small merchants. Upfront costs are manageable with the device costing around £50, and it can even be free in some bundle packages.
On top of the device cost there are no fixed monthly fees or minimum revenue requirements, just per-transaction fees. These vary but, with iZettle, merchants are rewarded with lower transaction fees the more volume of sales they put through the service.
With no clear leader or leading technology the mobile payments market place is still fragmented and several different scenarios could unfold as the card providers, banks and mobile operators all make their own plays for a piece of the action.
Near-field communication (NFC), where NFC-enabled smartphones can be used for “tap and pay” contactless payments, is one possible scenario but NFC has struggled to gain traction to date. That’s in no small part due to the fact Apple hasn’t gone down this route and so iPhones, which account for around 35-40 per cent per cent of the smartphone market in the UK and US (depending on whose figures you look at), aren’t yet NFC-enabled.
Beacon technology – location-based wireless sensors that can communicate with smartphones using Bluetooth Low Energy (BLE) – could start to take off for mobile payments, especially if Apple goes down this route as it already has iBeacon functionality built into its iOS mobile operating system. In this scenario Apple has more than 500 million customer card details on iTunes and could enable mobile payment via BLE for the transaction, using iTunes as a transfer mechanism.
Plus, new competitors are emerging all the time: last summer, for example, e-payments giant PayPal launched its own wireless chip-and-Pin reader, PayPal Here, in the UK.
Finally, many merchants may be waiting to see what happens in another important area of mobile payments: the ability of customers to pay for goods and services out of “digital wallets” held on their own mobile phones. If, as has long been promised, this technology finally takes off, then card payments could slump. At the same time, small business owners will also need to invest in technology to handle this new kind of payment.
However the development of mobile payments plays out, merchant adoption will be the key to deciding what technology and providers become the major players and that depends on security, trust, value and low cost of entry for small businesses.
It’s all a bit of a gamble, then – but for some merchants, the bigger gamble in the short term may be continuing to tell customers ready and willing to spend money now that they don’t accept payment by card. After all, in a survey conducted by pollsters YouGov, back in 2012, a full 16 per cent of the 2,000-plus UK adults surveyed said that they had left a shop in the previous year without making their intended purchase because the retailer didn’t accept cards.
That’s literally money walking out of the door – and it’s something most small-business owners simply can’t afford to lose.
