Both Visa and MasterCard and some giant banks have been in the news recently regarding settlement of a lawsuit merchants levied against them in defiance of the percentage of purchase price plus fixed fee the companies charged, without allowing merchants to charge their own fees to offset their losses.

The settlement will likely induce some merchants to charge more for credit purchases while others offer deals for cash paying customers.  However, don’t get your hopes up; already other merchants are contending the ruling, stating that it is too lenient with the large banks and credit card companies, and the whole thing could not be finalized for another seven years.

But you’re an entrepreneur; you want to keep cost down and revenue up. And there is hardly a time  more critical as when first launching your business. How, at first, do you collect payment – especially when the majority of people no longer carry cash or checkbook (who wants to write a check for small purchases anyway?) – without running into the exorbitant fees credit card processors charge, or potentially disgruntling customers by charging an additional fee for using their plastic?

In the past several decades, there has been one place we’ve turned to look for innovation: Silicon Valley. And yet again, they offer up a solution:

Mobile Card Processors (MCPs). Whether you are an artist, sell produce at farmer’s markets, do house calls, or for any reason need to accept payments on the fly, an MCP could be your (new?) best friend.

Yes, it’s different from PayPal: you can’t send money to someone else, but customers don’t need an account to pay  you.

What are MCPs? 

  • Perhaps you’ve seen the small rectangular devices attached to iPhones, iPads, Blackberrys, Android smartphones and tablets. But perhaps you haven’t. After all, you opened this article.
  • Mobile Card Processors plug into the audio jack or charging port of most smartphones and tablets. Credit and debit cards can be swiped through them  and processed by an app, so long as you have  a reliable internet (3-4G) connection. They’re generally small, lightweight, and do not require their own power source.

What are the benefits of MCPs?

  • They’re simple – With one of those bad boys, you no longer have to request card-carrying customers go to the nearest ATM, ask them to write a check, take a (carbon) copy of their card, or send them an invoice later through email. Simply whip out your smartphone or tablet, attach your MCP, and let them swipe.
  • They’re secure – It’s more secure than traditional methods of taking credit card information to be processed later. None of the card’s information is stored on the phone, and there are no hard copies to worry about losing.
  • They’re green – Customers can sign the screen directly with their finger, and receipts can be sent via emailed or text, thus eliminating the use of paper.
  •  They’re attractive – By removing a cumbersome step you may gain and retain more customers.
  • They’re popular – Many small business owners are beginning to use MCPs. This means customers are more likely to be familiar with the payment method. They may even be confused if you don’t give them the option.

Which MCP should I use?

  • There are a variety of MCPs available. Some have monthly fees and low percentage-per-transaction costs; others have no monthly fee and higher per transaction cost.  
  • Many sites review MCPs, though you should be wary of their results. This is because a certain site will rank certain products highly, while others will rank the same product worse. Review sites work best to find out what options there are, and then research each option individually to see which fits best for you. It’s not boring or a waste of time – you’re researching which option will help put more dough in your pocket.
  • Certain MCPs require a merchant account. If you have one, swell; if not, don’t panic – other MCPs, such as Square, require you only prove that you’re a real person.
  • Take into account what type of business you do and how much – a higher service charge is coupled with entering a card number manually, and some companies require you do a certain dollar amount of business every month.
  • Refer to our list detailing the fees and requirements of several popular MCPs.

Most small businesses should see an increase in profit from using an MCP, even if they’re currently using traditional credit and debit card processors. The Ann Arbor Newspaper reported that one local business owner estimated he saved $400 monthly just by switching to an MCP. Potential savings of that caliber at least warrant your own cost-benefit analysis.

[CC Photo courtesy of Tax Credits]