- Using a mobile credit card reader is a great way for small businesses to make sales at events, but not every brick-and-mortar store needs a mobile credit card reader.
- Consider fees and security measures during the mobile card reader purchasing process.
- Mobile credit card processing makes it easier for customers to pay from anywhere, which can give your business an advantage over competitors.
- This article is for small business owners who want to learn more about mobile credit card readers.
As customers act, small businesses react. With customers wanting to make purchases quickly and easily, small businesses are turning to mobile credit card readers to make it easier for customers to pay from anywhere with just a swipe.
By coupling your smartphone or tablet with a credit card reading add-on, it's easy to process transactions – whether you're at a conference, a client's remote work site or simply at home. You can even take your products on the road to trade shows and accept payments at the show by using your mobile device and mobile credit card reader.
You don't have to bring a bulky credit card terminal or credit card machine to every event, as your mobile phone and the add-on device take up minimal space and can allow your business to make money. It's a simple process that helps make payment processing easier for small businesses.
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What is a mobile credit card reader?
A mobile credit card reader is a device that you attach to your smartphone so that your phone can act as a credit card reader. These devices enable payment through traditional credit card swipes, chip payments or contactless payments.
How mobile credit card readers work
There are three types of mobile credit card readers:
- Magstripe. This term is the official name for credit cards that customers swipe to pay – the term is a portmanteau of "magnetic" and "stripe." With magstripe mobile credit card payments, the customer's payment information is stored in the card's magnetic strip, where it is static and unencrypted. As such, scammers can easily steal a customer's credit card information.
- EMV. This term is the official name for credit card chip payment. Since chip data dynamically encrypts customer payment information, scammers have a far more difficult time accessing this information. This makes EMV mobile credit card payments significantly safer than magstripe payments. If your company swipes cards that have EMV chips, you could be held liable for any resulting fraud. You should also note that the data complexity of EMV transactions can lead to slower processing times.
- Near-field communication (NFC). More commonly known as contactless pay, NFC facilitates wireless customer payment data transmissions to a mobile credit card reader directly from the customer's phone. NFC data is dynamically encrypted and changes with each transaction, making contactless payments especially secure. Additionally, customers must enter a PIN or scan their fingerprint to approve NFC transactions, adding additional security. Notably, NFC transactions are processed near-instantly.
- Bluetooth-enabled. Whereas the above three categories describe how customer data is transmitted from a customer to your company's credit card processor, any magstripe, EMV or NFC card reader can be Bluetooth-enabled. With a Bluetooth-enabled reader, you can accept customer payments within a short distance of your smartphone or tablet. Put another way, with Bluetooth-enabled readers, you don’t have to bring your smartphone or tablet with you to every transaction – your reader itself is all you need within an adequately short distance.
[Read Related: Mobile credit card processing myths]
How to accept credit card payments on your phone
The market is crowded with a dizzying array of options for merchants looking for an easier way to accept credit cards. Learning how to accept mobile credit card payments isn't overly challenging, but it requires an understanding of the process and the major players in the market. It's important to take the necessary steps when seeking the right mobile card reader for your business. The steps include:
1. Own a business.
It might sound obvious, but most mobile credit card payment providers require applicants to prove they have a business before they can sign up to use the service. The good news for business owners is that these platforms were designed with small businesses in mind.
That means virtually any business of any size can get approved whether you own a boutique, run a handyman service or sell wool socks you knit in your spare time. While a mobile credit card processor makes the most sense for businesses that move around or host events, that's not the only type of business that can benefit from the device.
"Small business owners, street vendors, and businesses that set up at events throughout the year can benefit greatly from mobile processors, but brick-and-mortar stores should still consider it if they want the option of paying away from the cash register as well," said Nathan Grant, a credit industry analyst at Credit Card Insider.
The smallest businesses have the most to gain by opting for mobile credit card readers, which are cheaper and far more portable than traditional options. Businesses that don't accept credit cards are virtually guaranteed to miss out on some sales.
If you own a small business, you've checked off the first step of the process to obtain a mobile credit card reader. Again, it seems obvious, but it's important you follow the guidelines and rules to ensure you're given a card reader.
2. Pick a mobile device.
Before you pick up a mobile credit card reader, you'll need at least one compatible mobile device. But don't worry – there are options for virtually every mobile platform, including iOS, Android, BlackBerry and Windows Phone.
One major benefit of modern credit card readers is that they work with the devices you already own. That means there's no need to carry around additional hardware, aside from the reader add-on itself. Most credit card readers attach to your device via the headphone jack or charger port and are small enough to fit in your pocket.
If you'd prefer to process payments without a separate adapter, many services allow users to complete a transaction by manually entering credit card information into any internet-connected phone. But for the sake of convenience, lower fees and privacy, most small businesses should spring for a card reader add-on.
Some services require the use of a mobile app. Downloading that app will allow you to properly use either an internet-connected mobile device or the mobile credit card reader. Each business is a little different with how it uses its payment gateway, so be sure to know what offering you're receiving.
Most devices accept both debit cards and credit cards, but for the sake of clarity, it's not a bad idea to confirm with the company before purchasing the processor. Some customers may prefer to pay with a debit card, so it's helpful to ensure there aren't any added complications with using different card types. The process for paying may also be different with a debit card. Make sure you know the intricacies of each payment type to better understand the potential customer experience.
3. Pick a credit card processing company.
Choosing the right service for your business is the most complicated part of the process. You'll have to include the startup costs, fees and compatibility in your business plan.
The best credit card processing companies offer competitive transaction fees, a fast and free application process, and a high approval rate. Many of the leading services offer similar functionality, but fees and other costs vary widely. And some lack a few basic features, like the ability to capture a written signature or void transactions directly from your mobile device. [Check out our review of National Processing for the lowest transaction rates.]
"The primary differences between traditional processors and mobile processors are the costs and fees associated, which depend on which types of payment you want to be able to accept for your business," Grant said.
For small businesses, fees are a critical consideration. Will your business save money by offering transactions through mobile credit card readers, or will the added convenience for customers hurt the business's financial bottom line? If your business can't find a way to use a mobile credit card reader, it might be worth using more traditional credit card processing solutions.
Grant offered a solution for small businesses worried about the fees associated with a mobile card reader: "If you want to be able to offer mobile payment methods but worry it could cut into your business, consider setting a minimum payment for credit purchases."
Let's say you run a local candy shop, and you're at a community event downtown. Consider requiring a minimum purchase of $10 if a customer wants to pay using a credit card. This way, the fees for your mobile card reader will only apply if a customer at the event buys $10 or more worth of product. You can accept cash for all purchases under $10. If fees are a concern, there are ways to work around them to better serve your business.
When it comes to selecting the best credit card processing service, it's important to look at the fees each company offers. It's also important to look at the different features each company offers. Find a credit card processing company that best lines up with your business's needs and then make a decision on which company to use. [Merchant One is our best pick for the credit card processor that offers the most features.]
4. Secure your device.
Before you process your first credit card payment, take a few minutes to ensure your device is secure and all software is updated. That includes checking to make sure you have installed the latest updates to your mobile operating system.
Only install apps from trusted sources. Apps that you download from the Apple App Store, Google Play, BlackBerry World or Windows Phone Store are probably fine; apps downloaded from elsewhere on the internet may not be.
During business hours, consider keeping the device you use for mobile transactions locked with a password. If the device is lost or stolen, you'll rest easy knowing your data is safe. Keeping data safe is an often-overlooked aspect of using mobile credit card readers, but it should be an important thought for businesses.
If your mobile card reader gets hacked, the ensuing fallout could damage your small business's reputation. Always work to protect your customer data. Recently, 7-Eleven Japan dealt with a mobile payment processing issue. The company launched a mobile payment app, but the app had a flaw and a hacker was able to make $500,000 worth of purchases on the cards of roughly 900 customers. Security should be a priority when accepting payments via your mobile device.
5. Set up shop.
You're almost there. Most services will ship you a free card-reader attachment for your mobile device when you sign up. Once you've received your reader, you'll probably have to download a corresponding app for your device.
Each app is different, but most will have to be set up. You will likely be able to specify whether to display a field for tips and prompt customers to enter their email address, among other options.
If you're taking the credit card reader to an event as your main way of accepting payments, test it out before attending the event. Losing out on sales because you didn't set up your payment processor correctly would make for a negative event. Avoid that frustration by taking the time to properly set up and test your device before accepting payments from customers. Make sure customers can pay without issue.
6. Promote your new mobile credit card payment option.
What good is having a new mobile payment option if nobody knows about it? Potential customers might steer clear of your business if they think it isn't equipped to accept credit cards. You want them to know that it's easy to pay for your products.
Make sure to mention that you're now accepting credit cards. And if customers visit your place of business, put up a sign explaining the new payment option.
You can also use your website and social media outlets to spread the word, especially if you're attending events or trade shows. Share that you'll accept credit cards at the event to better appeal to customers.
The bottom line
Mobile credit card readers can be a good investment for businesses, especially businesses that host or attend events frequently. When finding the right mobile credit card processor for your business, scrutinize general pricing, fees and security measures.
The goal of accepting credit card payments on your mobile phone is to make it easier for customers to pay from anywhere. If you keep that goal in mind while also aiming to reduce costs and increase data security, your business will be in a good place.
Additional reporting by Max Freedman and Brett Nuckles.