Emerging payment technologies for SMB owners

In today’s fast-paced business environment, it can be difficult for small business owners to keep up with the latest payment processing solutions. Thankfully, in this article, Sekure Payment Experts delves into three of the most important new payment methods that can help companies accept payments from consumers whose transactional preferences are changing. These technologies are mobile card readers, QR code payments, and near-field communication (NFC).

Mobile card readers

When it comes to accepting payments via credit or debit card, mobile card readers provide an ideal and inexpensive option for small and medium-sized businesses (SMBs). In the past, merchants could only accept credit card payments at fixed terminals (or at least terminals that, from a practical perspective, didn’t move much). Fortunately, this isn’t still an issue. With the advent of mobile card readers, companies can now accept credit card payments even if the firms’ customers aren’t in the same physical location as their premises.

Most mobile card readers are user-friendly, requiring little to no training or adjustments to be made before they can be used in conjunction with an organization’s existing point-of-sale (POS) software. In this way, they effectively become mobile POS systems.

Companies are able to pair a card reader with smartphone, tablet POS systems, or other mobile electronic devices by using a wireless Bluetooth or headphone jack connection. When a customer is ready to make a purchase, the company processes the payment using the mobile card reader. The following steps are carried out by the business in order to complete the transaction:

• The transaction amount is entered

• The customer’s card is swiped, dipped, or scanned 

• The customer provides a signature

• The business sends a receipt to the customer via email or text message

SMBs benefit from using mobile card readers by better accommodating their customers’ preferred methods of payment. In general, using a mobile card reader is simply hassle-free. In 2021, customers paid 57% of all payments with debit or credit cards. This is according to 2022 findings data collected from actual customer purchases, as analyzed by the Diary of Consumer Payment Choice.

Mobile card readers have become more important in recent years, as the global economy has grown and the use of card payments has increased. If a business only accepts cash, then customers who don’t always carry cash are turned away. Such a customer may still want to do business with the merchant, but there are few other options. Businesses may also turn away potential customers who do carry cash, but don’t have enough with them at the time of their intended purchase.

Both customers and merchants express serious concerns about the safety of various payment systems, which is normal. Mobile card readers use payment tokenization to prevent fraudulent charges and the theft of sensitive credit card data. Payment tokenization can also help reduce identity theft.

Payment tokenization isn’t complicated. Instead of using a credit card number, which could be stolen in transit, the tokenization process first encrypts the number into a safe token. This technique is generally used for the communication of credit card numbers. The token is then decrypted at the other end of the transmission.

When a company accepts credit card payments, it must cover the merchant processing fees (costs related to executing a typical transaction) charged by the credit card company. Depending on the type and brand of credit card used to execute the transaction, these fees can vary. Typically, merchant processing fees are between 1.3% and 3.5% of a transaction’s total value.

In addition to the processing fees associated with merchant accounts, companies can incur other fees for a variety of reasons. Examples of these include chargeback fees, assessment fees, and monthly or yearly fees, which are part of their overall merchant account rates.

Mobile businesses benefit from mobile card readers for the same reasons that brick-and-mortar stores do: mobility. Here are some businesses that gain an advantage from using mobile card readers for merchant services:

• Food trucks

• Caterers

• Plumbers, electricians, and other contractors

• Pop-up shops

• Sales booths at festivals and farmer’s markets

Mobile card readers are a practical and affordable alternative to permanently installed payment solutions. In fact they work great for fixed business locations like restaurants, boutiques, and markets. In order to accept payments from customers, many of these SMBs have already switched to using card readers that are compatible with their mobile devices. Industry research indicates that this trend is only expected to continue. Of interest, recent reports estimate the value of the mobile card reader market to be $10 billion, and projections indicate that it will grow to $65 billion by 2032.

QR code payments

Quick Response codes, or QR codes as they’re more often known, are another alternative for customers to use when making purchases. This technology, which is widely utilized by Google and a myriad of other companies, was originally developed by Japanese firm Denso Wave in 1994. The QR code approach isn’t only efficient but is also easy to implement. QR codes can be read automatically with the use of a camera app or a pre-installed QR scanner on a smartphone. This allows for the rapid utilization of these codes by the general public. The associated payment form a QR code activates can be modified, so it matches an organization’s identity in terms of the colors used, the logo selected, and the overall design of the form itself.

QR codes have been around for a while, but their popularity has waned since their introduction, because the average person can’t read them and typically doesn’t find them interesting. But QR codes possess a few highly useful applications, including the dissemination of information, the promotion of consumer interaction, and the acquisition of financial compensation (i.e., payment) for goods and services. Recently, the use of QR codes has experienced a resurgence in popularity after seeing a decrease in previous years. This is mostly due to the ubiquitous availability of smartphones and their ability to scan QR codes automatically (in many cases, this happens without a phone user needing to tap or activate any function).

The two primary types of QR codes are static QR codes and dynamic QR codes. In theory, each type of QR code can be used to store data — typically a URL tied to a website or web application (although QR codes can also store email addresses, phone numbers, calendar data, SMS messages, geolocation data, and plain text).

With static QR codes, a business might choose to print out codes and place them in consumer-convenient locations, since they can’t ever be altered. After a QR code has been developed in a static version, it’s impossible for a company to make modifications to it if such modifications become necessary (in such cases, the website or application activated by the URL would have to be modified). Thus, anytime a static QR code has already been generated, a company would need to produce a new code and distribute new copies of that code to replace the ones they currently have in circulation.

However, dynamic codes permit URL modification, allowing firms to tailor their URLs to meet their own specific requirements. When scanned, dynamic QR codes activate short URLs, which, in turn, redirect to secondary URLs, which can be changed at will for retargeting without the QR code needing to be altered. This allows dynamic QR codes to be used in association with content and campaigns that are based on schedules or rules (for instance, prices that change based on times, dates, special sales, and/or other conditions).

Dynamic QR codes often provide quicker results than their static counterparts. This is because short URLs are generally processed more rapidly than the longer ones used in static QR codes. Dynamic QR codes can also offer tracking and analytics data on their use to their creators. Thus, businesses that make use of dynamic QR codes have a significant advantage over rivals that don’t utilize them.

Dynamic QR codes are used to keep tabs on data like:

• The number of code scans

• Payment locations

• Operating systems used

Thanks to the proliferation of online QR code generators (websites that generate a QR code when you type or paste in a URL), businesses can now offer consumers either dynamic or static QR codes to use in conjunction with their payments. But mobile payments are just one possible use of these QR codes; access to this information also helps in tracking customer habits and developing strategic marketing initiatives. This is useful for better targeting customers and developing and optimizing ad campaigns.

Due to the convenience they provide, QR codes have found particular applicability to the payment systems of restaurants. A restaurant can provide each table with a unique code that patrons can use to unlock digital menus, place orders, and even pay their bills. The restaurant’s POS system can record orders placed at the table and handle payments made via this method.

Recent research has confirmed the rapid expansion of QR code payments, perhaps due in part to their contactless nature. Customers can pay without handing over their card details, and digital receipts are issued in the form of QR codes. By 2025, analysts predict that more than 2.2 billion individuals will have used a QR code to make a purchase.

Near-field communications (NFC)

Near-field communication, or NFC for short, also eliminates the requirement for physical contact during financial transactions. NFC is the underlying technology that enables contactless payment methods, which include (but aren’t limited to) many of today’s debit and credit cards. Payment systems that integrate NFC include Google Pay, Apple Pay, and Samsung Pay, among others.

The use of NFC has grown in popularity in recent years. NFC has a long history of service in electronic door locks and key cards, including those used in hotels. The United States is just one location where this technology is utilized in a wide variety of applications.

Via the use of NFC, two devices can exchange data while they’re relatively close to one another; for example, a smartphone can exchange data with a payment terminal. This advancement paved the way for customers to make payments using just their smartphones (even, in some cases, when their phones remain in their pockets).

NFC employs Radio Frequency Identification (RFID), a technology long utilized for applications such as inventory and grocery store scanning, but with a somewhat reduced range of action. In contrast to RFID, which can pick up signals from several hundred feet away, near-field communication (NFC) needs the communicating object to be within a few inches.

If a customer wants to use NFC to make a payment, all they have to do is bring a device or card with NFC technology near a payment terminal; this is the only action that’s required of them. By using this payment method, buyers are able to make purchases without disclosing any sensitive financial or personal data.

When the terminal’s built-in NFC scanner is able to correctly identify the payment device, the terminal transfers information that’s been dynamically encrypted to allow the payment to be processed. This is done to ensure the transaction is conducted securely.

Now that NFC scanners are widely available, customers can use their smartphones, along with third-party payment systems like Apple Pay and Google Pay, to make purchases. Furthermore, the vast majority of credit, debit, and prepaid cards in circulation today contain technology that offers the ability to make payments via NFC.

Allowing customers to pay using NFC has several advantages from a business’s point of view. Here are just a few of these:

• High security: When a mobile app is used in conjunction with NFC technology, the user’s financial information is first tokenized before it’s sent to the seller, providing an extremely high level of security. When a consumer pays using an NFC-enabled card, they won’t need to key in a PIN code, since entering a PIN isn’t necessary. This means that criminals can’t get access to an account by using information they’ve acquired independently

• Fast checkout speeds: Using a contactless payment method, as opposed to more conventional options like cash or credit cards, speeds up the transaction process at the register. The processing speeds for NFC readers are rapid, and the time it takes for a consumer to hold an NFC card or smartphone in front of a scanner is just a few seconds — a significant improvement over older chip cards. Compared to processing chip cards, NFC readers are far faster

• Greater convenience: Businesses can enjoy greater mobility and efficiency since virtually every customer they deal with now has a smartphone. Over time, consumers will discover that using their phones for payment is handier than pulling out their wallets. This, in turn, shortens lineups and reduces the annoyance other customers experience while waiting. For their part, buyers can lessen delays incurred while having to dig out their credit cards by simply paying using their mobile devices

• Low installation cost: In order for a company to accept NFC payments, the terminals or other POS systems that are used for the business need to incorporate NFC technology. This requires a modest initial expenditure on the part of the company. With some forethought, this can be arranged prior to the setup procedure for most POS systems. The price of NFC scanners is fairly modest, ranging from around $50 to several hundred dollars

When budgeting for the purchase and rollout of an NFC reader or terminal, businesses should factor in the additional cost of merchant processing fees. These costs are unavoidable, but fortunately, it’s possible to know their exact amounts. These fees are on par with those for credit card payment services or other online payments made using a similar array of technologies. Generally speaking, they run between 1.5% to 3.5% of the amount of each transaction.

Accepting payments through NFC can be beneficial for SMBs across all sectors — including retail, hotels, and/or service providers. Fixed payment terminals paired with NFC scanners allow brick-and-mortar businesses to take immediate, contactless payments at their registers.These scanners can be installed permanently if need be. Meanwhile, it’s now possible for food trucks and other mobile businesses to utilize an NFC reader that’s smaller and more portable, making it easier for them to travel from location to location.

Over the last several years, there’s been a clear uptick in the use of payment methods that don’t require physical contact to complete a transaction. According to eMarketer’s research, the number of Americans using their mobile devices to make in-person payments increased from 92.3 million in 2020 to 101.2 million in 2021. More than half of all smartphone users will have made a purchase using NFC by 2025, according to further research made public as part of this study.

It’s reasonable to believe that NFC-enabled payment terminals will become the norm for payments in the future, just as terminals that read magnetic stripes became nearly ubiquitous decades ago. Because NFC is still a young technology, it’s hard to predict with 100% accuracy that this will be the case. Nevertheless, the rise in popularity of alternative and digital payment methods, which include contactless payment solutions and smartphone purchases, suggests this prediction is more likely than not to become a reality.

Tap, pay, done: the unstoppable rise of NFC payments

It’s common for customers to complain about long lines to pay at busy checkout registers, resulting in a challenging predicament for small businesses. When using a payment method that supports NFC, customers can potentially complete a transaction in just a few seconds. With NFC payments, in-store purchases can be completed in around 10 times less time compared to any other payment method. Compare these transaction times:

NFC payments: 1-5 seconds

Credit cards: 15-30 seconds

Cash: 25-45 seconds

Payment alternatives that are quick, safe, and user-friendly are essential for SMBs in every sector. NFC payments, sometimes known simply as “contactless payments” or “proximity payments,” are more secure than other methods of doing business online or over the phone. In addition, offering many different methods of payment demonstrates a care of customers’ needs and desires, while making the purchasing process more convenient for them.

NFC advantages include:

• Security: In order to avoid entering a PIN and protecting against fraudulent transactions, NFC payments encrypt customers’ bank account information using tokenization. Customers can make purchases without having to enter a PIN.

• Convenience: In the U.S., 41% of people never use cash for any form of payment or expense in a typical week’s worth of purchases. As a result, no monetary exchanges are made using physical currency.

• Freedom of payment: Digital wallets are supported by 40% of consumers, while contactless payment methods have the backing of 37% of consumers.

Which payment method comes out on top when different varieties of wallets face cutting-edge payment technologies? Publicly reported numbers show that:

• There are more than one billion mobile wallets being used in the U.S. to carry and access consumers’ money and personal information

• For 43.9 million of these wallets, Apple Pay is utilized to successfully complete purchases

• Roughly 25 million individuals use Google Pay frequently to make purchases

• More than 16 million people use Samsung Pay to make purchases

Join the future of financial transactions with NFC!

The emerging technology of NFC is responsible for the recent uptick in the number of people making contactless mobile payments in the United States. More than half of all smartphone users are expected to have made a purchase via NFC by 2025. This estimate is based on an in-depth analysis of digital payment trends for SMBs and current events.

Sekure Payment Experts can help you get set up to take NFC payments quickly, so you can be part of the next payment revolution. If you want to take part in this large-scale transition, get in touch with us at (866) 710-7382 or email [email protected]. Alternatively, visit our website at www.sekuremerchants.com.