Is there anything the iPhone can’t do? Did you know your iPhone can now process actual credit card payments. This has huge implications for the smaller business owner and or individual who needs to pay someone but has no cash at the time. A business can use it as a mobile credit card processer wherever they are based. There are three companies battling for the magnetic strip reader for the iPhone market, hoping to win over mobile merchants with alternatives to the larger, hardwired credit card terminals that are used in bricks and mortar retailers.
Jack Dorsey, co-founder and chairman of Twitter, started Square in December 2009 and recently released its first batch of a tiny, cube-shaped credit card reader. Additionally, VeriFone, global manufacturer of credit card payment systems, recently started shipping its PAYware mobile credit card swiper, which fits like a sleeve over an iPhone. Mophie, who makes iPhone cases, sells its own payment device called Marketplace. Today’s un-tethered mobile workforce is the target of these devices.
Users of the devices include piano teachers, food cart vendors, flight instructors, Craigslist sellers, and independent sellers of one-of-a-kind merchandise like art or designer clothing. The devices are expected to be used by service sellers who come to customers’ houses for things like plumbing repair or cleaning. Currently, users of smart phones can only use apps that accept credit card numbers entered by hand, but merchants usually pay higher fees for these so-called “card not present” transactions, which are more vulnerable to fraud. Is this going to be a boost in sales for the credit card providers? Will more people now apply for credit cards as the use for them increases with innovations like these?
Each of the three manufacturers is marketing their products differently. VeriFone, for example charges its PAYware swiper owners a one-time, $49 fee, plus $15 per month over a 2-year service agreement, and the merchants also pay a per-transaction fee of around 17 cents, as well as interchange fees. But VeriFone is counting on their long history in the industry to win over customers, despite what may look like high costs.
Mophie is marketing on aesthetics, based on their history of designing “beautiful, sexy” iPhone cases. The Mophie Marketplace is an iPhone case with a card slot built in. It costs less than $200 and is compatible with several of the already-existent payment apps for the iPhone.
The Square processor is small enough to hang on a keychain. It plugs into the iPhone audio jack and consists of a magnetic strip reader that converts card data into audio tones that are deciphered by Square’s iPhone software. It will also be compatible with the Android and other smart phones when the corresponding software is ready. There is no pricing structure yet, but Square plans to distribute the hardware for free and make their money on the individual transactions. Square doesn’t require individual merchant accounts with banks.
The innovations in credit card readers for the iPhone and in the works for other smart phones is giving individual merchants and service providers more options for accepting payments from their customers and unleashing them from hardwired credit card processors and “card not present” transactions.