The ability to accept credit cards has been a tremendous benefit to many businesses. By accepting cards they have been able to:
- Increase sales - by enabling customers to buy with credit
- Reduce employee theft - by reducing the number of cash transactions
- Offer innovative rewards - Using ‘statement credits’ to select customers to help foster loyalty and repeat business
However, until recently, these benefits were almost exclusively reserved for bricks & mortar or online traders. Businesses without a physical location or online payment processor were forced by necessity to trade in cash (or cheques), but that has changed.
The proliferation of smartphones in the UK since 2007, has bought connected computer processing to almost everyone. And, these mini-computers, have enabled the development of mobile credit card processors.
What are mobile credit card processors?
Mobile credit card processors come in many different shapes and sizes, but they all broadly offer the same functionality, in that they enable traders to take payment for goods or services remotely, from any location with sufficient mobile coverage.
Some mobile credit card processors connect to your phone using Bluetooth and can look similar to wireless payment terminals commonly employed in cafés and restaurants, or like the card readers that banks use for enhanced security. Other mobile card processors are physically attached to your phone using the headphone jack, and while some read the card’s chip&pin , others read the magnetic stripe. Any of these methods effectively enable you to take payments via a mobile phone.
How do mobile credit card processors work?
From a technological standpoint, mobile credit card processors work in much the same way. The recipient of the money enters the required amount into the terminal (or directly into their phone, in some instances). The customer hands their credit card to the trader for payment. The card is swiped or the EMV chip read to collect the card details.
Once the required amount and credit card details have been entered, an encrypted payment request is transmitted using the mobile phone to the payment gateway (card machine supplier), who in turn contacts the associated bank or card issuer.
If the bank confirms that funds are available to complete the transaction, an encrypted message is returned to the mobile phone requesting customer authorisation. The customer then enters their pin number, which is again transmitted and (assuming the pin is correct) the payment is passed for clearing.
Once the payment has been processed, a message is returned via the mobile phone to confirm.
Of course all of this (other than typing in the pin number) takes fractions of a second, as it would in a retail store.
The area where mobile credit card processors tend to differ is in the account set up. Some processors require traders to get a traditional merchant banking account, while other processors will complete the merchant processing for their traders (for a fee).
What are the advantages of mobile credit card processors?
The benefits which mobile credit card processors offer tend to be centred on the convenience they offer businesses and customers alike. Businesses can use the mobile processors to transact without cash, and similarly their customers do not have to have ready cash with which to pay them. People working in the remote service and retail industries, like beauticians, door-to-door cosmetic sales people, hairdressers, etc., are particularly likely to benefit in this regard. Equally, electricians and plumbers working on emergency repairs, where the customer has not had time to withdraw cash, are likely to reap the rewards of immediate payment.
Another major benefit of payment card transactions is the audit trail they provide, which has a two-fold benefit.
- Tax inspectors are far less likely to question declared revenues, due to concerns about cash-in-hand work, as a full audit trail is available.
- Customers feel more confident that they are dealing with a reputable business, and they are less likely to be questioned for aiding and abetting tax evasion.
Downsides to mobile credit card processors
As with any business, there is a cost associated with taking credit cards and this additional overhead must be accounted for in the wider pricing structure, which will probably mean pricing becomes marginally less competitive.
All mobile credit card processors are only as good as the mobile coverage they have available. Although the UK is reasonably well connected, there are still gaps in coverage, and any trader predominantly operating in these areas are likely to get little to no benefit from a mobile card processor.
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