Credit card transactions are worth trillions of dollars worldwide each year, but despite years of long-tail merchants being able to accept payments through systems like PayPal online, real world card transaction devices have been slow to arrive.
Now three are hitting the market at the same time: one specialised box office solution from Eventbrite, and a number of general purpose plug-in card readers to attach to mobile devices.
Startup companyEventbrite has recently launched a credit cardreader device that connects to an iPad. The device, called the At The Door Card Reader (Eventbrite is better at product than name development, it seems!)lets Eventbrite customers handle door and merchandise charges at their events. The app even works with a wireless receipt printer from Star. Transaction data is backed-up and encrypted. For a further guarantee of safety, Eventbritewill fight charge-backs on behalf of its users “so they can take credit card payments and still sleep easy”. To boost uptake, the company is waiving their usual 2.5% transaction fee for people who use the At The Door Card Reader system – though it does charge a 3% credit card fee.
Eventbrite CEO and Co-Founder Kevin Hartz said in a statement: “At The Door transforms an off-the-shelf iPad into a paradigm-shifting tool for managing sales for events. We’re essentially taking the devices that are proliferating among consumers and transforming them into perfectly-tailored tools for event organisers, at no cost, and with greater impact than anything previously available.” The $10 app and device combination is currently available in the US only. But demand will be high worldwide. As the company points out: the At the Door system lets users view real-time door sales reports alongside online sales; it collects attendee contact and demographic data that are integrated into online reports; it eliminates the need for time-consuming training with its easy-to-use iPad interface; and reaches on-the-spot customers that couldn’t be reached before.
Meanwhile, PayPal is using its global reach to launch “PayPal Here” – a physical card processing device that works with the iPhone to process credit card transactions. In March 2012 they rolled out their physical card reader infrastructure to 4,000 Home Depot stores in the US, though it foresees small stores as its main marketplace.
EBay CEO John Donahoe said of PayPal Here: “it has the most complete set of features and functions of all available products on the market [and it] will be backed by PayPal, which means it will go global fast, and will have access to over 100 million customers.”
Paypal has 100 million registered users but at present only those with iPhones can use the system (PayPal says it will be rolling out an Android version soon but hasn’t commented on details of a tablet app). The app is complemented with a card reader, but PayPal thinks that its killer edge comes from three unique features.
The first of these is a PayPal debit card that will give merchants instant access to their PayPal takings – they will also earn 1% on any transactions made with the card. The second is that the PayPal Here system doesn’t need a card reader – the merchant can use their phone camera to scan a credit card. And the final weapon in the PayPal here armoury is the low transaction fee of 2.7%, undercutting Square’s fee of 2.75%.
But Square, launched last year by Twitter co-founder Jack Dorsey, is already taking $4billion of mobile transactions per year. The merchant fee of 2.75% hasn’t deterred thousands of small retailers from using the system as it still massively undercuts traditional credit card transaction costs. Jack Dorsey explained to Wired.com:
“[When we first launched, we] tried to get a merchant account and it was a disaster. We had to create a whole corporate structure. We’d sign up with one firm and they’d route us to a completely different organisation. It took four weeks. Meanwhile, we had to pay to get our account set up and enter into a one-year agreement. Then we found out there was a monthly fee. Then a PCI [Payment Card Industry] fee.And a gateway fee. Then there was the interchange [which is] the amount you pay to accept credit cards — 1.79 to 4%of every transaction. Everyone takes a cut: the merchant bank, issuing bank, credit-card company. Then there’s the independent sales organisations that sell the credit-card terminals.We thought we could do it a lot better. We wanted to make it so anyone come go through that whole process in one download. You put in your name and address, we ship you a reader, and you’re done. For free. All you pay is 2.75 per cent per swipe. That usually covers the interchange and leaves a small amount for us.”
Square currently works with the iPhone and iPad and Android but like the Eventbrite product, the system is only available in the US and Square may find itself lagging as PayPal exploits its existing international reach.
Square Dongle and Android app
Paypal Here Dongle with iPhone
There have been criticisms that these mobile terminals aren’t sufficiently safe, but Jack Dorsey challenges this by saying that social networks will usher in a new type of security. “We’re adding more information to every transaction, so everyone can have more confidence and lower the risk of fraud or nonpayment. So fees could come down as card companies take on less risk.”
Startup e-commerce solution provider Intuit has launched GoPayment – its own mobile paymentdongle, that works with iPhones, Android phones, iPads and Android tablets. The killer featire for many small merchants will be that GoPayment is compatible with QuickBooks accounting software, which makes it easy for merchants to keep track of all transactions.
As the battle for mobile payments heats up, traditional online payment solutions are going mobile with a suite of apps and services at their disposal. Small businesses will be the winners.