In October 2014, Apple launched its highly anticipated mobile wallet solution, Apple Pay. Although the ability to make purchases through a smartphone app was not a brand-new concept, the business world viewed Apple Pay as the product that would finally push near-field communication (NFC) and contactless payment technology to the forefront of retail.
"Apple raised visibility [of payments as] something you can and should be able to do with a mobile device," said Gregory Mann, chief marketing officer of mobile wallet solution LoopPay. "It took the conversation out of B2B partners ... and brought it to consumers' dining room tables. The average person out there [now knows] this is something you can do with your phone."
While consumers may find it convenient to pay for their morning coffee or weekend shopping trip with their smartphones, is an NFC point-of-sale system really worth the investment for small businesses? Kaz Nejatian, co-founder and CEO of mobile payment system Kash, noted that many smaller merchants are hesitant to accept mobile payments because of the associated equipment purchases and fees.
"Every mobile payment app increases retail costs and reduces [the retailer's] margin," Nejatian said. "If you accept [a system like] Apple Pay, you have to invest in POS [point-of-sale] systems and contracts, and your fees go up."
But over the last decade, huge strides have been made in mobile technology, and the near ubiquity of smartphones and tablets among American consumers indicates that mobile payments will eventually become a standard POS option, Mann said. Merchants recognize where this trend is going, he said; it's a matter of determining how fast it's going to occur, and at what point a business owner needs to jump in. [Accepting Credit Cards: A Small Business Guide]
"In [a small business], the decisions you make today affect you years from now," Mann told Business News Daily. "You have limited funds and watch every dollar. You have to decide when and where to make an investment."
Who needs mobile payment options, and why?
For service-based businesses, accepting payments via a customer's smartphone may not make much sense at this point. But brick-and-mortar shops and restaurants that want to speed up transaction times — and ultimately, improve customer turnover rates — might find it helpful to offer this option to consumers.
"While mobile payment technology is limitlessly employable, [it is] especially great for quick-serve food and retail locations due to the speed and convenience they allow at checkout," said Suneera Madhani, CEO and founder of credit card processing company Fattmerchant.
One advantage of mobile-based payments is a decreased fraud liability for merchants. This is an especially strong selling point in light of the numerous high-profile retail credit card breaches that occurred over the past couple of years.
"The security of ... contactless [payment] technologies is an added benefit," Madhani said. "There are safeguards against fraudulent transaction attempts, like Apple's Touch ID and unique codes for each transaction. And since the merchant isn't processing and collecting the customer's information themselves, the liability for the business decreases."
If you think your business could benefit from offering mobile payment options, there are a number of factors to consider before deciding on a technology and/or service provider. Mann said business owners need to think about not only the cost of the equipment and associated fees, but also whether their customers would be interested. [27 Ways to Accept Mobile Payments]
Nejatian advised looking for a system that allows you to do more than just accept a payment. He cited the Starbucks mobile app as an example of a successful mobile payment strategy.
"The Starbucks app wins because it does something ... other than provide convenience for customers," Nejatian said. "It's faster to pay [via the app] than with a credit card, but [customers] also get things — the loyalty program is embedded. The average app user spends more [because of this]."
Madhani noted that, if budget is a concern, you can shop around and ask service providers about terminal exchange programs. However, if the costs ultimately outweigh the benefits for your business, don't feel pressured to implement a mobile POS system right now. Traditional forms of payment aren't going extinct just yet, and you won't lose a sale by only accepting cash or credit.
"Paying with a phone is faster and cooler, but it needs to make sense," Nejatian said. "Mobile payments will win when it makes sense for both [consumers and retailers]."
Still need help deciding, particularly about Apple Pay? Visit our pros-and-cons list for businesses here.