from the experts APPS OFFER SIMPLE ALTERNATIVE FOR ACCEPTING CREDIT
Retailers considering options for accepting credit cards might wonder whether Square or PayPal Here — two apps that allow sellers to accept credit cards anywhere — are a viable alternative.
Square offers a free app and a free magnetic card reader that attaches to the user’s smartphone, allowing sellers to accept credit cards when they’re away from their retail location. Users pay a fee of 2.75 percent per swipe, or 3.5 percent plus 15 cents for transactions in which the card is entered man- ually. Square also offers a $275 per month flat rate with no per-swipe fees.
As with Square, PayPal Here offers a free app and a free card reader that attaches to an iPhone or Android device. Credit card transactions can be done using the swipe device or by using the camera on the phone. PayPal Here charges slightly less than Square, at 2.7 percent per transaction for swiped cards, or 3.5 percent plus 15 cents for manually entered or scanned cards.
While both Square and PayPal Here are simple and convenient for oc- casional credit card transactions in the field, critics point out that some factors may make the services less attractive for day-to-day business. For instance, Square has been criticized for poor customer service and also for its often-misunderstood policies that may result in funds being held for 30 days or more with little explanation.
ally charged than if the card had been taken over the phone or via the Internet. Other processing fees might include a statement fee, a monthly minimum fee, a gateway fee, a chargeback fee and a termination fee.
Some processing agencies also charge a PCI compliance fee, intended to ensure that the merchant does not run afoul of the Payment Card Industry Security Stan- dards Council’s requirements regarding the security of credit card information. This annual fee starts at around $100 and can go up from there. PCI compliance guidelines and information can be found on the PCI Security Standards Council website at
www.pcisecuritystandards.org.
The Risks: Hackers and “Friendly
Fraud” Fraud is a large concern for consumers as well as merchants who do business with credit cards. That’s why businesses choosing to accept payment cards must show compliance with PCI standards. Hackers are not just targeting larger corporations. Smaller businesses have become targets as well because they often lack the security practices common in larger companies. Symantec’s 2013 Inter- net Security Threat Report, Volume 18, reported a 42 percent increase in targeted attacks in 2012, with 31 percent of all attacks aimed at businesses with fewer than 250 employees. When a breach occurs, it can cost a company thousands of dollars in fines
50 Mobile Electronics May—June 2013
and the ability to take payment cards, not to mention a damaged reputation. For a smaller business, this often can result in the closing of the business. Major credit cards also offer consumers added protection to their purchases. For example, American Express extends the manufacturer’s warranty an additional year. With all credit cards, consumers have the right to dispute a charge if they feel they have not received the product or service for which they have paid. While this may give a shopper a sense of secu- rity when purchasing an item or service, it presents an additional concern for the business that accepted the card. When a customer disputes a charge, the merchant receives what is known as a chargeback, and the consumer is refunded the money spent on the dis- puted purchase. The customer’s right to seek a refund in this manner is federally protected, in an effort to protect the public from unscrupulous merchants, poor-quality goods or services, and credit card fraud or identity theft. The trouble is, some consumers know that the burden of proof is on the merchant, and they work the system to their bene- fit. When this occurs, it is referred to as “friendly fraud,” and it cost U.S. retailers almost $12 billion in 2011 alone. Need- less to say, chargebacks can be costly and time consuming. There are some things a business can do to protect against this friendly fraud. Effective steps to take include:
Making sure the customer knows who you are and how to contact you. Receipts should include the business’s phone number, fax number, email address and physical address. Making sure the business’s name
matches the name the customer sees on his or her statement. Asking for a zip code that matches the consumer’s billing address and getting the CVV code from the card at the time of purchase. Using a service that requires a signa- ture when shipping goods. Challenging chargebacks. Supply the
information that was collected and put the burden of proof back on the customer. If your point-of-sale software is inte-
grated with your processing company, then you may be prompted to capture this information at the time of the sale. The software you use also can make it easier to look up a transaction and match it with the sale.
The Choice: How to Proceed for
Better Business Ultimately, whether to accept credit cards is a decision that every business owner must consider by weighing all the pertinent factors—cost, ease of use and ongoing fees. However, it is clear that the use of credit cards is not abating in our economy, and merchants who resist the move to accept the fast-paced transaction capability of credit cards may soon find themselves left behind.
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