Mobile Payments Pay Off for Business – a Comparison

• Mobile payment solutions are cheaper, more flexible than EFTPOS
• Improve cashflow by being paid on-the-spot in any location
• Westpac, PayPal and Paymate services already in Australia

A looming shift towards mobile payments could be the latest byproduct of the explosion in smartphone and tablets. Mobile payments would rise fourfold in four years to US$1.3 trillion in 2017, Jupiter Research has predicted.

Mobile payments have already arrived in Australia with services from PayPal, Paymate and Westpac (comparison below). While mobile payments offered convenience for consumers, they could also have a huge impact in how businesses operate.

The first benefit was improved cashflow. Mobile payments reduced the gap between issuing invoices and receiving payment, often a big problem for small businesses.

Instead of waiting for the ‘cheque in the post’ and lengthy transaction times, mobile payments turned sales into working capital.

Mobile payments were already establishing themselves in the US as a smart way to speed up cashflow. A machine shop in Washington, D.C., struggled to make customers pay within the 30-day period. Owner Scott Henshaw had to find ways to pay supplies and wages as invoices remained unpaid for 60 or 90 days.

Henshaw started to use PayPal’s mobile payment service PayPal Here which added a card reader to his smartphone. Customers now made mobile payments on delivery and Henshaw received payment “in seconds”.

Mobile payments also required very little equipment and were highly flexible. Instead of hiring a bulky point-of-sale terminal for card payments, a business ower could use a smartphone or tablet with a small dongle plugged into the headphone jack.

The small footprint meant a mobile payment system was well suited to taking payments in any location, whether on the shop floor, in market places and pop-up stores, or during business meetings and lunches.

Unsurprisingly, mobile payments were favoured by highly mobile workers. Plumbers, decorators and electricians or people who worked on the move such as market stallholders and travelling sales people could get paid on the go.

And mobile payments were less expensive than conventional methods such as EFTPOS. An EFTPOS terminal typically cost $90 for set-up, $30 annual fee, $40 a month in rental and a $20 minimum monthly merchant fee. Each EFTPOS transaction also cost 10c to 30c.

For small businesses, mobile payments could prove to be a cheaper way of receiving money.

A young market for mobile payment systems has emerged in Australia. Some of the options available included:

PayPal Here

The online payment giant has branched out into mobile payments. The PayPal Here service included a free mobile app and card reader that turned a smartphone into a mobile payment device. Customers could also use their own phones and the PayPal app to make payments to businesses and retailers.

PayPal has trialled the service with a small group of Australian merchants and would be launched nationwide in mid-2013. Although pricing had not been confirmed, it was likely that there would be no charge for set-up, the card reader dongle nor ongoing fees for using the system.

Instead users paid 30c for each transaction plus 2.4 – 2.9 percent on each credit card transaction. PayPal’s regular fees for its payment services were additional.

WestPac’s Mobile PayWay

Customers of Westpac’s PayWay service could turn their iPhones into card readers, perform real-time credit card checks, assign multiple users to one facility and email customer receipts.

However, PayWay was only available on Apple iPhones running iOS 4 or above. It was free to set up and cost 30c per transaction plus a fee of 2.75 percent.

Paymate OnTheGo

OnTheGo was another mobile payment system with an app and a card reader device that enables smartphone sales terminals. Also only available on the Apple iPhone, Paymate offered a choice of packages.

The standard plan featured no charge to set-up and no ongoing fees. There was an initial charge of $19.95 for the card reader device and a 55c transaction fee plus 2.25 percent.

Three higher-volume plans discounted the percentage charged on each transaction in return for a higher monthly fee.

Small businesses comparing the costs of mobile payments to the expense of using an EFTPOS system could find plenty of savings.

Andrew Boyd is the co-founder of CreditCardCompare.com.au.