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Accepting credit card payments has never been easier for small businesses. Here is a step-by-step process for how to accept payments with your phone.
Many businesses need to accept payments while they’re on the go, making accepting credit card payments using your phone an attractive option. This guide covers how to accept credit cards and digital payment methods using your phone, as well as the costs, benefits and key considerations to keep in mind.
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Yes, you can accept credit card payments on your phone by partnering with a payment processor that supports mobile payments, such as Square or PayPal. These vendors provide mobile credit card readers, apps and flexible, pay-as-you-go terms specifically for mobile credit card processing.
“Mobile card processing is especially valuable for small and medium-sized businesses that provide services on-site, such as home repair, personal training or delivery services,” said Bob Legters, chief product officer at payments platform Paysafe. “It allows businesses to go cashless, enabling customers’ payment choice and allowing businesses to collect payments in real time.”
You need to open a merchant account with a credit card processor or set up an account with a payment facilitator like PayPal or Square, if you don’t already accept credit cards.
Most processors and facilitators have their own dedicated payment app. You’ll need to download it, enter some basic business information and complete your account setup.
Most apps are available for both iOS and Android devices and include guided setup steps to walk you through linking your bank account and customizing your payment settings.
Some apps may also let you set tax rates, add inventory and enable tipping options — useful features for those in retail or service-based industries.
Many processors support Tap to Pay technology or provide a free mobile credit card swiper so you can begin accepting payments. Mobile credit card readers often connect to your phone via Bluetooth, though some can physically connect with a dongle as well.
“Since [mobile credit card processors] utilize existing smartphones or tablets, they are cost-effective by reducing hardware expenses,” said Peter Galvin, chief marketing officer at payment solutions provider NMI. “Additionally, they are simple to set up, usually only requiring the download of an app and features are easy to update through the app store.”
A virtual terminal is typically a secure webpage hosted by your payment processor where you manually enter the customer’s credit card information.
To process a payment using a virtual terminal, you need the following details:
Start accepting payments by entering the order into the virtual terminal or processing the customer’s card using your mobile card reader.
Send the customer a receipt or print one out if you have a mobile receipt printer. Most payment apps and virtual terminals allow you to email receipts.
After the transaction settles, the money will be deposited into your bank account, minus the processor’s fee.
Few people carry cash, so accepting cards and digital payments increases convenience and helps you deliver a great customer experience.
“[Mobile phone payments] don’t just provide the best customer experience — they [help businesses] build stronger, lasting relationships with their clientele, improving their operational model and creating flexibility in how they do business,” said Matt Downs, EVP and president of Global Platforms at international payment processor Worldpay.
Mobile payment functionality gives you the flexibility to try out new sales channels and venues, even if your business has a fixed location.
For example, if you own a restaurant, having an Android payment app or the ability to accept payments with an iPhone allows you to process transactions at food festivals, catering events or community pop-ups.
Retailers like clothing or jewelry stores can explore new opportunities through trunk shows or pop-up shops. Even independent sales consultants can accept payments on-site when visiting client locations — no countertop hardware required.
Even fixed-location businesses can use mobile payment devices to speed up checkout lines. This is especially helpful for high-volume stores or during popular promotions.
When customers face a long wait to pay, some may abandon their purchase. But with cashiers using mobile payment equipment to check out customers in line, you can significantly reduce wait times and maximize sales.
Instead of chasing down overdue bills or waiting for customers to mail a check, you can accept payment at the time of service. Collecting payment on the spot saves time and money — and helps you avoid the debt collection process and write-offs from bad debt.
Most mobile payment processors’ rates fall between 2 and 4 percent of each transaction.
Your exact rates will depend on your processor or facilitator, their plan and pricing model, and several factors related to your business, including:
Pricing models vary. Payment facilitators generally use flat-rate pricing, while credit card processors often employ interchange-plus pricing or tiered pricing.
Here’s how each pricing model works:
Full-service payment processors may also charge additional fees, including the following:
“Beyond the basic pricing models, businesses should evaluate processors based on their transparency, contract flexibility and ability to scale with business growth,” Downs recommended. “Payment processors that offer customized fee structures or volume-based discounts can provide significant savings as your business expands.”
Mark Fairlie contributed to this article.