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Urban Myths

Myth #1: I already have a POS system — the hassle isn't worth it.

Mobile payments offer more flexibility to reach the customer than ever before. No longer are salespeople tied to a cash register and counters to finish the sale. That flexibility can mean the difference between revenue and a lost sale. Mobile payments also have the latest technology to track sales, log revenue, fight chargebacks, and analyze performance quickly and easily.

Myth #2: Setup is difficult and complicated.

Setting up usually just involves downloading the vendor’s app and following the necessary steps to get the hardware and software up and running. The beauty of modern payment solutions is that like most mobile apps, they are built to be user-friendly and intuitive so merchants would have little trouble setting them up. Most mobile payment providers offer customer support as well, so you can always give them a call in the unlikely event that you have trouble setting up the system.

Myth #3: All rates are conveniently the same.

Thanks to the marketing of big players like Square and PayPal — which are not actually credit card processors, but aggregators — rates can vary widely and significantly. For instance, consider that the average debit rate is 1.35 percent. Square’s is 2.75 percent and PayPal Here’s is 2.7 percent, so customers will have to pay an additional 1.41 percent and 1.35 percent, respectively, using these two services. Some cards also get charged well over 4 percent, such as foreign rewards cards. These companies profit & mobile customers lose. Always read the fine print.

Myth #4: Credit card information is stored on my mobile device after a transaction.

Good mobile developers do not store any critical information on the device. That information should only be transferred through an encrypted, secure handshake between the application and the processor. No information should be stored or left hanging around following the transaction.

Myth #5: It raises the risk of fraud.

Fraud’s always a concern. However, since data isn’t stored on the device — for Square and others, the data is stored on their servers — the risk is lessened. For example, there’s no need for you to fear one of your employees walking out with your tablet and downloading all of your customers’ info from the tablet. There’s also no heightened fraud risk for data loss if a tablet or mobile device is ever sold.

Myth #6: Wireless devices are unreliable.

Reliability is very often brought up as I think many businesses are wary of fully wireless setups. I think this is partly justified, but very easily mitigated, for example with a separate Wi-Fi network solely for point of sale and payments. With the right device, network equipment, software and card processor, reliability shouldn’t be an issue.

Myth #7: Mobile processing apps are error-free.

Data corruption glitches do happen on wireless mobile devices. A merchant using mobile credit card processing apps needs to be more diligent to review their mobile processing transactions. Mobile technology is fantastic when it works.

Myth #8: "If we build it, they will come."

Many wallet providers believe that if you simply build a new mobile payment method into the phones, consumers will adopt it as their new wallet.   This includes proponents of NFC technology, QR codes, Bluetooth and other technologies, but given very few merchants have the POS systems to accept these new types of technologies, consumers have not adopted. Currently, only 6.6 percent of merchants can accept NFC, and even less for QR codes or BLE technology, hence the extremely slow adoption rate.  Simply put, the new solutions are NOT convenient, and do not replace consumers’ existing wallets, not even close.

Myth #9: Mobile wallets are about to happen.

They aren’t about to happen, especially in developed markets like the U.S.

It took 60 years to put in the banking infrastructure we have today and it will take years for mobile wallets to achieve critical mass here.

Myth #10: The biggest business opportunity in the mobile payments space is in developed markets

While most investments and activity in the Mobile Point of Sale space take place today in developed markets (North America and Western Europe), the largest opportunity is actually in emerging markets where most merchants are informal and by definition can’t get a merchant account to accept card payments. Credit and debit card penetration is higher in developed markets, but informal merchants account for the majority of payment volume in emerging markets and all those transactions are conducted in cash today.

Myth #11: Will Be Too Hard to Remain Compliant

Even before they begin pondering the possibility of accepting credit card payments, small business owners tend to have at least a basic awareness that they will have to put a system in place for capturing and storing sensitive data securely. Fortunately, the necessary encryption is already built into leading POS systems, so there is nothing left to do on your end in terms of compliance.

Myth #12: Payment Processing Is Too Costly

Perhaps you have heard complaints from fellow small business owners as they discussed having to pay processing fees and deal with interchange rates. They probably grumbled those things did not concern them until they started accepting credit cards.

Indeed, there will be some associated fees for payment processing. However, it is important to realize how many of your customers you may not be able to serve when only accepting cash at your establishment.

Generally, only about five percent of a transaction goes towards fees. Consider though, how many customers would likely go elsewhere if they learned you only accept cash transactions and that things were not likely to change soon.

In most cases, customers do not get too upset if they try to pay for something at a company by using a credit card and discover the payment system is out of service. However, if you tell people they will never have the option to buy something at your business via credit cards, they may take their patronage elsewhere because that is more convenient.

Myth #13: Funds Will Take a While to Reach You

Another common misconception is that small business owners will have to wait a long time before seeing the funds associated with credit card transactions. In reality, once you swipe a card, an instant connection takes place between your credit card processor and the cardholder’s issuing bank. Once approval is granted for that transaction, the money immediately gets transferred from the bank to the payment processor. After that, you usually only have to wait a day or two to receive the funds.

Myth #14: Buying Expensive Equipment Is Essential

Expensive equipment is another detractor when small business owners are deciding whether to begin processing credit cards. However, that should not be the case. People may be able to:

Make monthly payments for equipment.

Rent or lease POS equipment.

Use mobile devices they already own to accept credit card payments.

Hopefully, this information has emphasized the need to do careful research instead of immediately trusting common misconceptions. By understanding what is available in the payment processing industry, you could help your business succeed and be more inclusive.


1. Understand Your Business' Payment Requirements

Businesses have different payment needs. The processor you select for your business will depend on the number of transactions it handles and the type of transactions. For example, a retail store’s credit card processing needs will be different from an online retailer that sells one-off products or services such as consulting and coaching. Your choices may be limited if you own a small business. In this case, you will need to use the services of an organization that specializes in processing credit cards for businesses like yours. Also, you may have to determine the type of credit card you want to process. This includes choosing between a swipe, chip, or mobile reader. Swipe cards are processed face-to-face and are typically for small businesses with low transaction volume (less than 100 transactions per month). Chip cards require contactless payments that work with a device (e.g., mobile phone) and can be processed without having an internet connection. The equipment needed to process chip cards is more expensive than the equipment required for swiping. However, it’s worth investing in if you’re processing high volumes of transactions or want increased security measures. If you have a merchant account with bad credit, you may find it difficult to get a reputable processor. 

2. Evaluate Your Business's Risk Level

If you are just starting out and don’t have much of a track record, it’s better to choose a lower-priced processor with less flexibility in rates and fees. As your business grows and becomes successful, consider upgrading or switching processors (these may take some time due to the expense). But if you own an established company that does extensive volume transactions at high dollar amounts per transaction, then it may make sense for you to consider seeking out more sophisticated processing tools such as integrated terminal capabilities or custom credit card programs that allow additional customer enhancements like loyalty rewards. At this stage, you should also evaluate your desired payment terms for customers who enroll in recurring billing plans over the long term.

3. Watch Out For False Marketing Tactics

Like other industries, the merchant processing industries are full of deceptive and distracting marketing messages that may trap you if you’re not careful. The Federal Trade Commission offers these tips to avoid being deceived or misled when selecting your credit card processor:-Be wary of statements that promise you will save money by using the service, as this may not be true for all situations. -Beware if they offer discounts only available after signing up with them because it’s likely there are incentives behind those promises. It’s always worth doing independent research about any company before committing to anything long-term (or potentially permanent).-Look closely at what fees they charge in order to understand how much more expensive their services might be. -It is also important to review the contract carefully before signing on because often time’s agreements can lock merchants.

4. Know Credit Card Pricing Models

There are two different price models for credit card processing:  swiped and keyed, as well as a third model called aggregate.  Swiped pricing is the simplest to understand because it only charges one fee per transaction regardless of how much money you process on that given day (or month). Keyed transactions charge an additional flat fee or percentage based on the total amount charged in that particular transaction. Its aggregate is a little more complicated but can save your business some serious coin if you have enough volume to take advantage of its benefits. The best way to find out which type of pricing will work best for your company depends upon what kind of business model you use and how often customers transact with your firm each month or year. It is also best to avoid merchant accounts with bad credit.