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New Payment Frontiers: Smart Phones

Jul 1, 2011

With smartphone use growing in America, the technology exists for anyone to process a credit card when it comes time to check out a customer. Whether you are an ecommerce merchant or a brick and mortar retailer, accepting credit card payments is easier than ever. Now it is simple to swipe a credit card with any iPhone, Blackberry, or Android cell phone. Authentication is fast, and paperless receipts sent via email are easy and efficient.

"Everyone has a smartphone, and we can use that to bring costs down," says Taufiq Mithani, CEO of The Merchant Solutions, a provider of transaction services. "We'll give retailers a free swiper to be used with an application on their phone." He further explains the two ways to handle transactions. "One, there's an application where you can just type in the credit card information.

Two, you can add an extra piece called a swiper that plugs into the smartphone. Just swipe the card," Mithani explains. That's a contrast from older systems. "A lot of retailers may have used the old routine of swiping the card with a ?knuckle buster' and paper. Now they have the ability to swipe right through the phone and get the discounted swipe rates," confirms Mithani. The solutions were unwieldy or depended on uncertain Internet connections, and required paper records that incurred high charges from credit card processing companies. Now, with a web-enabled smartphone connection, it is easy. There are even apps designed to let a retailer use an iPad as a cash register, says

Retailers who operate entirely online are also benefiting from new technology, even if they never physically touch plastic. Paypal for retail transactions has given online shoppers a new way to pay for products. However, Google recently announced a new digital wallet offering that is a competitor to Paypal, with the coming battle between the Internet behemoths to benefit retailers and shoppers. A recent article on ecommerce news site ZippyCart quoted one expert saying, "Customers will be able to send and receive money more quickly and easily, with full confidence their funds are in a bank account, without worrying about cash, checks or higher-cost services."

Barbara Peterson, owner of Prettie Pretties by BJ, sells sandals online, both wholesale and retail. She says that Paypal is still dominant for her business, but she has been less than satisfied with the service. "Paypal seems to be the industry leader," she mentions. However; in her opinion, it is not easy to use, especially given the way the service calculates shipping. "When you have a number of items that are so many different prices, it becomes very tricky to adjust the shipping costs," she explains, suggesting that ecommerce merchants shop around for the best plan.

According to, retailers are especially good candidates for accepting credit cards if they offer higher priced items, if the average receipt is high, if they want to boost impulse purchases, and if their competitors accept credit cards. The process is fairly simple, and according to, the right processor handles all of the more complex details smoothly.

However, as credit cards become easier to use for retail transactions, merchants need to be aware of the danger of fraud. According to an article in Investors Business Daily, based on a report from fraud prevention firm Retail Decisions, fraudulent credit card attempts increased 32 percent in the first half of 2010. Moreover, a report from research firm Trustwave says that smaller merchants are the most vulnerable. According to the research, "98 percent of small merchants both fail to maintain the firewalls that are designed to protect payment information, and fail to regularly test how secure their card-protection systems are." Furthermore, 75 percent do not protect the payment data that they store. Although brick and mortar companies are not liable for stolen card transactions, ecommerce merchants may get stung by fraudulent transactions.

What can merchants do? Security experts, including those at Visa Security Sense and the U.S. Chamber of Commerce, offer many tips that can help. First and foremost, data security is key. Keep track of exactly what sensitive data you collect and store, from names to card numbers to bank account details. Do not store sensitive data you do not need. Do not use credit card numbers as ID numbers, for example. Keep your payment system and data isolated, so that only those employees who need access can get access. Eliminate remote access if you can, and make it secure otherwise. Stop hackers by using strong, unique passwords that change frequently. Use updated firewall and anti-virus technologies. Merchants can protect themselves by taking extra steps to verify credit card numbers. There are systems to check a zip code or street number. The use of the card verification number can cut down on fraud. Some merchants even require a password before allowing transactions to be completed.

However, retailers should not let the need for sensible security scare them away from accepting credit cards. According to a white paper from Motorola, "Technology is the catalyst in providing consumers with an increasing number of choices for services, as well as the convenience of electronic payments. Credit cards, once reserved for corporate use or the convenience of the affluent, are common and available to almost everyone." Retailers who cater to these customers are likely to reap big benefits.

For more information:
The Merchant Solutions
22801 Venture Blvd., Suite 300
Woodland Hills, CA 91364
Tel.: 818-744-0717
Toll Free: 888-707-2836
Fax: 888-708-6732

Prettie Pretties by BJ
240 North Delaware Ave.
Deland, FL 32720
Tel.: 386-738-1334

Topic: Business Strategies

Related Articles: cell phones  smart phones 

Article ID: 1472

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