Have you ever been in a store and noticed a lack of cash registers or point-of-sale (POS) terminals? Yet customers are making purchases. How do they do it? Two words: mobile payments.
Accepting mobile credit card payments is actually a growing trend in business. So step aside, traditional payment methods—there’s a new contender in town.
What are mobile payments?
A mobile payment is a method that consumers can use to purchase products or services from their phones. Mobile payments let individuals send or receive money through their smartphones or tablets, either through a mobile wallet, application, or web browser.
There are a number of transactions that fall under the category of mobile pay, including:
- Payments made for point-of-sale purchases
- Online bill payments
- Sending or receiving money through a web browser or app
- Paying employees via mobile wallets
With mobile payment systems, consumers can do everything from their phones. They don’t need to carry or take out wallets with cash, checks, or credit cards.
In 2016, roughly 46% of U.S. consumers reported making mobile payments, according to a Pew Research Center report. Although mobile payments seem to be all the rage today, they actually started in the early 2000s.
Mobile payment apps
Mobile payments aren’t restricted to companies that have their own apps. In fact, there are numerous applications businesses can use to accept mobile payments from customers.
Here are a few mobile apps for small business:
- PayPal Here
- Google Pay
- Apple Pay
- Samsung Pay
- Flint Mobile
You can also use some apps (e.g., PayPal Here) to accept credit card payments from customers. Keep in mind that you have to pay a fee to use mobile payment systems.
Should you accept mobile payments?
Before accepting another payment method to your business, ask yourself a few questions:
- What are the perks of accepting mobile pay?
- Can I afford the fees?
- Will my customers even use it?
- Is it safe to use?
If you want to see whether mobile pay is right for your small business, check out the answers to these questions below.
What are the perks of accepting mobile pay?
Like anything, there are advantages and disadvantages to using mobile pay. You’re already familiar with some of the disadvantages to mobile payments, like fees.
So, what about the advantages?
One perk of accepting mobile pay is that consumers find it easy-to-use and convenient. And we all know that a consumer-approved payment method means potentially more sales. According to one survey, over 80% of respondents said that mobile wallets were convenient. And, nearly 80% said that they were easy to use.
Another advantage of mobile pay is that individuals can receive alerts on their phones when they spend or receive money. This can help some consumers budget more effectively.
Many businesses incentivize mobile payments by offering some sort of reward (e.g., points or discounts). And why wouldn’t they? Fifty-three percent of the population are interested in mobile payments incentives. In an effort to receive more rewards, consumers may make more purchases through mobile pay than with another method, like cash payments.
Can I afford the fees?
Accompanying mobile payment fees vary depending on the system you use. Generally, some fees you may have to pay include one or more of the following:
- Setup fee
- Percentage of the customer’s purchase (e.g., 3.5%)
- Flat fee per purchase
- Flat monthly fee
Shop around to see what different apps and systems charge. Then, calculate how much the fees will impact your business’s gross margins.
Will my customers even use it?
In one survey, only 5% of consumers said they prefer paying with a mobile wallet, compared to 34% who prefer credit card payments. And, that same study found that consumers avoid making mobile payments because of four key factors:
- Habit (66%)
- Fraud fears (39%)
- Tech issues (23%)
- Fear of losing a device (18%)
But, despite these reasons that many consumers skip mobile payments, there’s still a good portion of the population that pays with their phones. Again, 46% of the population has made mobile payments.
The number of customers who will use mobile payments depends on a number of factors, like your industry, product or service prices, incentives, and target audience.
For example, if your target audience consists of Millennials or Generation Xers, you may have more customers making mobile payments. According to the Pew Research Center report, 72% of mobile payments users fall under these age groups.
Is it safe to use?
One drawback of mobile payments is security. Consumers worry that their data is not protected. And, many individuals fear that using mobile payments can lead to stolen funds or identity theft.
According to one survey, only 12% of consumers trust alternative payment providers to protect their payments.
However, safety procedures such as authentication, data encryption, and users logging on via secure network connections can help put those fears to rest.
How to start accepting mobile payments
If you’ve decided that accepting mobile pay is the right choice for your business, use the tips below to get started.
1. Implement a mobile payment system
First things first: you need to select a system that lets you accept mobile payments from customers.
Many of the mobile payment apps and systems integrate with your regular point of sale system. After doing some research on fees and ease-of-use, sign up for one to start accepting mobile payments.
2. Let your customers know
What good is adding mobile pay to your accepted payment methods if nobody knows about it?
Notify customers that your small business accepts mobile payments. You can create an Accepted Payments section on your business website, post about it on social media, announce it through email marketing, and add signs in your business.
3. Encourage mobile payments with rewards
One way to make mobile payments work for you is by incentivizing customers to use this option. You can streamline your customer loyalty program for small business by rewarding customers when they make mobile pay purchases. And, offer discounts to customers who pay with their phones.
According to one survey, these are the three mobile credit card processing incentives customers want the most:
- Cashback on purchases
- Loyalty program points
4. Keep your books up-to-date
Accepting mobile payments may be the right choice for your business, but neglecting your books is not.
Be sure to record transactions in your accounting books when customers pay with their smartphones.
Mobile pay alternatives
Of course, you don’t have to accept mobile payments in your small business. And if your customers aren’t too keen on paying with their phones, what’s the point?
You can diversify your business’s payment options by accepting one or more of the following:
- Credit cards
- Debit cards
- Store credit
When a customer pays you, don’t forget to record the transaction! Use Patriot’s online accounting software to streamline the way you record income (and expenses) and manage your books. Start your self-guided demo today!
This article was updated from its original publication date of 9/24/2012.This is not intended as legal advice; for more information, please click here.