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More Merchants Accepting Payments Over Mobile Devices, More Competitors Entering this Space

In June Square announced that they are now processing $6 billion annually while VeriFone and Intuit compete with similar product offerings that allow merchants to accept and process credit card payments via their mobile device. Meanwhile iZettle, dubbed the Square of Europe, expands from Scandinavia to the UK now with over $16 million raised in funding as PayPal prepares to launch a similar product, called Here, in the U.S., Canada, Australia and Hong Kong. As many players compete to offer the ability to accept payments on-the-go and at reasonable rates despite low volume, retailers have benefitted with more options to accept credit cards outside of traditional merchant accounts.

Smaller merchants and retailers have always incurred higher payment processing costs with traditional merchant accounts due to their lower volumes, and until recent years one of the only ways for a low volume merchant to accept credit cards at a more reasonable rate was through a master merchant model where transactions from many smaller merchants were aggregated and processed under one master account to reduce the processing rates with the combined higher volume. In recent years, however, companies such as Square, VeriFone, Intuit, PayPal and many others have appealed to small merchants offering convenient, portable and relatively low cost ways of accepting card payments without needing a traditional merchant account or being hit with monthly account minimum fees.

Square, the most well-known mobile credit card payment processing device and platform, recently announced there are now 2 million people and businesses accepting payments with Square in the United States and the total volume of transactions they process is $6 billion per year. While Square is likely the largest player in this space other major competitors include Intuit’s GoPayment and VeriFone’s SAIL hardware and software for processing credit card payments with a mobile device, and while their processing volumes may not be substantial, they likely aren’t negligible either. Although the total dollars processed on the mobile-based card accepting devices is still just peanuts compared to what’s processed on traditional merchant accounts, it is a significant and growing sector of the payment processing market that should be acknowledged.

In fact, many businesses see opportunity in this market as new entrants are still popping up. PayPal is preparing to release a similar product and service that includes the card reader hardware that plugs in to a mobile device as well as the ability to take payments directly from a customer’s PayPal account. The PayPal Here service, which will initially be released in the United States, Canada, Hong Kong and Australia, requires a PayPal Business account and charges a 2.70% processing fee for all swiped card and PayPal payments, competitively priced just below Square’s 2.75% rate. But PayPal isn’t the only one trying to penetrate this market as Groupon is also trialing a mobile credit card payment processing service and a Scandinavian start-up in this space is continuing to expand across Europe. iZettle has had success in Scandinavia and after raising $16.4 million in funding to date the company started trialing the product in the UK in June. Traditional merchant accounts have never met the needs of smaller merchants and individual sellers, but catering to their needs has carved out a nice-sized niche providing opportunity and incentives for more competitors to enter the market.

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