It wasn’t long ago that PayPal was an exotic method of payment. Now nearly every online retailer takes it. What’s more, you don’t need to go online and log in to send payments using PayPal anymore: You can use your mobile device to make or take payments using PayPal Here.
New payments systems are a crowded marketplace, with several competitors vying for dominance and innovation. Jim Salmon, Vice President of Business Services with Navy Federal Credit Union, (which has an alliance with Square) says their members in the micro- and small-business realm have been looking for simple solutions. “They didn’t want contracts; they wanted to pay as they go.”
Ease of Use
“Emerging payment systems allow small business owners the flexibility to accept payments other than cash or check,” says Salmon. “Most people don’t even really like writing checks anymore.” Beyond mere convenience, Salmon believes this allows greater opportunity for small- and medium-sized businesses to grow more quickly.
Salmon points out that accepting online payments means, “You no longer have to keep checks and cash on hand and risk losing them. By doing things electronically you mitigate risk.”
In addition to PayPal, there’s Square, a company that turns your smartphone into a POS system. GoPayment is a newer entry into the marketplace brought to you by Intuit -- the company behind TurboTax.
Not all new payment systems require you to install a widget on your phone or tablet to read credit cards. Much has been written about near field communication, or NFC. Consumers have actually been using this technology for years to make paying at the pump as simple as tapping their card or their own little widget. Isis from American Express turns your phone into the little widget; Google Wallet is another payment system utilizing NFC.
Jordan Harbinger, founder and partner with The Art of Charm, a social dynamics company based in Los Angeles, believes that PayPal -- almost old-fashioned now by emerging payments standards -- helps his business to close sales better. “If someone is buying something, especially a high-ticket item over the phone, if they have to go to the bank or cut a check, that’s just one more obstacle to overcome,” he says. Further, with international transactions, emerging payment methods remove the need to go down to the bank and convert the money.
Flint, from startup Flint Mobile, does what many small retailers have always wanted to do with their smartphones, but have never been able to until now: instead of swiping a credit card, taking a picture of it to run the charge. It’s not too different from what banks are doing with mobile deposit. The big change is that now anyone can accept payments using only their mobile device, sans the need for a widget. For those who prefer not to use credit cards in the first place, Dwolla lets consumers pay directly via bank transfer. There’s a small cost of 25 cents per transaction, with all transactions under $10 free.
Low Cost Convenience
These new payment systems all have one thing in common: they create huge new opportunities for small businesses. Gone are the days when you had to roll out an expensive point of sale (POS) system to run your business; now just plug a new payment system into your smartphone or tablet and start making sales. They even send out receipts for you.
“From a business perspective, it’s a no-brainer,” says Harbinger, whose company also uses Stripe. “I can run my credit card transactions without having to deal with a huge bank who might take hours to return my phone call.” Ultimately, he believes small businesses are paying for speed and convenience.
Do emergent payment systems mean the end of traditional merchant services? Salmon says no. “Square has certainly been disruptive,” he admits, but points out, “A lot of the traditional merchant services offer competing products now,” pointing to TSYS’s acquisition of ProPay as an example of established merchant services moving into the emerging payment market. “Bigger companies are definitely reaching out to these markets.”
Combine a mobile or tablet payment system with an inventory app and you’ve got a point of sale system at a fraction of the cost of traditional alternatives. This significantly lowers the bar of entry, allowing just about anyone to become an entrepreneur in their spare time. Whether you’re selling vintage clothes, coffee or car parts, emerging payment opportunities allow you to do so with fewer headaches and obstacles at a fraction of the price.