Small businesses fastest to adopt mobile payments

Many companies in a variety of industries are now trying to push a new kind of credit card payment system, and one major early adopter for these programs seems to be small businesses.

Mobile wallet credit card payment systems are believed to be the next big thing in consumer preference when shopping, and thousands of small businesses across the country are among the first merchants to begin adopting these initiatives as a means of attracting tech savvy customers, according to a report from USA Today. While just 6 percent of merchants responded to a February poll conducted by the National Retail Federation saying that they currently accept mobile credit card payments, about half of them expected to have done so within the following 12 to 18 months.

Currently, the total value of worldwide payments on mobile systems is expected to hit $171.5 billion this year alone, up 62 percent from the $105.9 billion in 2011, the report said. However, data from Gartner, a research firm, suggests that the rate of adoption might be so drastic the number grows to $617 billion by the end of 2016.

A large part of that growth comes from the fact that small businesses seem more eager than their larger, nationwide counterparts to adopt the technology, the report said. This is actually considered to be a good thing by companies developing mobile payment systems because these smaller merchants are able to be more adaptable and open to trying things that will help them attract customers.

"We're seeing a huge explosion in small business," Ebrahim Keshavarz, vice president of small business product management at AT&T, told the newspaper.

Which way will the industry go?
One potential problem with mobile payments is that currently there are a number of schools of thought on what, exactly, is the best way to proceed in the implementation and development of various types of systems, and currently the term is a bit of a catch-all, the report said. In the end, it's expected that only a few specific types of mobile payment platforms (which currently include mobile wallets, small card readers that plug into portable devices, apps, and so forth) will become popular with consumers.

The two that seem to have the most backing are mobile wallets and small card readers, the report said. And though the technology for the former is still expected to become more widespread within the next year, the latter is already booming.

Currently, more than 2 million merchants across the country use just one type of mobile card reading device, being pushed by the startup Square, the report said. This company offers businesses an alternative to sizable, costly point of sale credit card readers, which can carry price tags of between $1,000 and $3,000 altogether. That is in addition to the monthly and interchange fees businesses are charged, and the lengthy contracts they have to sign.

Square carries relatively little in the way of startup costs, as card readers themselves can be acquired at minimal cost and are offset with account credits for first-time users, the report said. Further, it works with nearly any mobile device, meaning that it can be used on the go or in stores, granting greater flexibility to companies.

On the other hand, mobile wallets are now being pursued heavily by established credit card, tech and cellphone companies, the report said. Google has already released its Wallet program, and recently expanded it to include more credit card lenders, but currently only works with six smartphones on the market. However, it is expected to face competition from a few companies in the near future. That includes Isis, a joint venture created by AT&T, T-Mobile, and Verizon Wireless, which is being tested in Austin, Texas, and Salt Lake City beginning this month. There, many businesses both large and small will have the ability to offer customers the convenience of mobile payments and, if it catches on, the service will expand nationwide soon after.

Mobile payments of all types are considered to be more secure than traditional credit card payments because of the way in which most of these systems encrypt data from the accounts. There are several additional layers of security that exist in mobile wallets in particular, which are not present in traditional card use.

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