POS Systems: Can a Simple Smartphone Do the Trick

Posted by on September 26, 2013 in Business Start Up Advice [ 0 Comments ]

mobile payment You likely spend a lot of time and diligence considering which POS system is right for your small business, but where are you at with accepting mobile payment?  Back in 2012, Starbucks recently signed on with a mobile payment startup to bring smartphone payments to each one of their 7,000 establishments across the country. Today, mobile payments for Starbucks crossed the 10% mark in the U.S. as a percentage of in-store purchases. As a result, Starbucks reported the best ever fiscal third quarter earnings with profits up 25% and trends rising. As quoted from their Chief Digital Officer, Adam Brotman, “these measures tell us that these various digital initiatives have added demonstrable impact to our U.S. business in the third quarter.”

Consider the difference a mobile payment system can do for your business. It literally only requires the use of a smartphone and transaction occurs. Here are some of the different types available:

  • Audio-Jack Magentic Stripe Reader: One of the most common ways to accept payments through a smartphone is via an audio-jack magnetic stripe reader (AMSR), a hardware dongle that reads the magnetic strip on the back of your credit card. These accessories plug into a headphone jack or USB-compatible jack that transmits the result into the software that’s installed on the smartphone. In lieu of an AMSR, many apps also allow you to type in the customer’s credit card number directly onto your phone. Either way, this type of payment is often able to encrypt the sensitive card data, keeping customer information secure when storing it.
  • Apps: Another method of accepting payment via a smartphone allows you to use the scanning mechanism on your traditional POS system. Customers can download the appropriate app – it may be a custom application you’ve commissioned to be developed specifically for your company, or it could be an existing mobile payment POS system made by a third party vendor. When users download these apps, they link their credit or debit card to the account, and when they want to pay at the register, your POS system’s scanner can read the app’s display on their screen.

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There are benefits and drawbacks to these types of mobile POS systems. One of the biggest advantages to accepting payment through a smartphone is the ability to take a credit card number and get paid wherever you are. This is important for small businesses which attend events and make sales at tradeshows, and can be particularly helpful for those companies that do business in many different locations, such as a general contractor or computer repair service.

In addition, the apps are often beneficial to small businesses because they build in a brand loyalty layer into the experience. By using a branded app developed for the small business, or by option to pay via a third-party mobile app provider, customers can often earn rewards or unlock certain benefits with continued use.

Drawbacks and Challenges

One of the significant challenges to overcome in using mobile payments, however, is the concern of security in transmitting sensitive customer data over a wireless network. Many of the mobile POS payment systems have taken necessary precautions to address this, but should your smartphone ever fall into the wrong hands, a knowledgeable attacker could modify what seems to be a safe, usable mobile payment app, to include malicious functionality that delivers card numbers elsewhere.

Drawbacks of the app systems include the need for technologies to be able to work with one another. Depending on your POS system, your scanner may not be able to decipher the barcode presented on a touchscreen display. Another challenge in implementing this mobile payment option is customer adoption. Presumably you want to offer this to consumers because it may cost you less in transactional fees or because you want to offer well-rounded payment options, but it may take time for customers to come around to the idea of storing their credit card information in their phone so that you can scan their purchase.

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Have you considered a mobile POS system for your small business? Why or why not?

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