What Does it Cost to Accept Mobile Payments?

As a business owner, you want to give your customers as many payment options as possible, right? The more options you offer, the greater the number of customers’ needs you meet. If you accept cash and card payments you’re already off to a good start. But in today’s tech-driven world, you have to be aware of personal technology trends—especially smart devices.

Mobile payments as a concept is simple: one mobile device initiates a transaction with another device equipped to process it. The customer’s mobile device must have a mobile wallet app to initiate the transaction where it securely stores credit cards. Most smartphones come with one already equipped, whether it be Apple Pay, Samsung Pay, or Google Wallet. After saving their card information in the app, customers are ready to make payments via their smartphone.

The merchant side is just as simple. In order to accept contactless payments through these apps, they must have a card terminal with NFC (near field communication) technology. With a quick wave of a smartphone, you can process a transaction exactly as you would with the swipe of a credit card.

There’s one big question left, though: what does it cost?

What does it cost to accept NFC payments?

It may be surprising, but in most cases, accepting mobile payments will cost nothing extra for merchants. As long as they have hardware with NFC technology, accepting mobile payments will cost the same as a swipe or chip card payment. There is no difference in interchange rates for mobile payments and processors do not higher rates for this transaction type.

Since most modern card terminals already have NFC technology, most merchants won’t need to invest in a fancy new card reader. If you’re wondering whether your current card reader allows for NFC transactions, all you have to do is look for this symbol:

If you have an older card terminal without NFC capabilities, you will have to upgrade if you want to start accepting mobile payments. Luckily, the only thing you need to replace is hardware. Your POS and processor will recognize NFC payments just as they would any card swipe. Card readers with NFC technology can be purchased for under $100, so there’s not a large investment involved.

Why is there no additional cost to accept mobile payments?

You’re probably waiting for me to break the bad news about hidden fees. I've got some good news for you: there aren't any. Just like swipe or chip card payments, mobile payments are classified as card-present (CP) transactions. This is great news for merchants because card-not-present (CNP) transactions require higher interchange fees. This is to offset their higher risk for fraud. 

But wait, you might say, there’s no physical card present during a mobile transaction! How can it be considered a card-present transaction?

It’s because it’s not necessarily the card itself that makes card-present transactions more secure, but rather the way payment information is transferred from the customer to the merchant. Card-not-present transactions require that card information be communicated via less secure channels, whether by sharing it over the phone or entering it into an online form. Card-present transactions, on the other hand, use tools like a magnetic stripe or EMV chip to store the card information. That information is then passed to the merchant through a swipe or dip of the card.

NFC payments operate in much the same way. Customers aren’t reading out their card or typing numbers into your machine, they’re transmitting a digital form of their card via NFC rather than using a magnetic stripe or EMV chip. To a processor, there’s no difference in security here.

How secure are mobile payments?

What may trip some merchants up is that mobile payments don’t require a pin or a signature to be completed.  In this way, mobile payments more closely resemble a card-not-present transaction. While it seems that they would have some of the same security risks as card-not-present transactions, mobile payments are actually one of the more secure methods of payment. 

If you think about smart devices like phones and watches, they already have a built-in security system in place. The user has to enter a code, use their fingerprint, or show their face to unlock the device, making it harder for card information to be stolen. With mobile wallets, there is also an added security step that asks for the code (usually presented as a fingerprint) at the time of the purchase. 

Even more than those levels of protection—which obviously are not perfectly secure—mobile wallets work through a complex tokenization system. That means that all the sensitive card information is encrypted in the app, and there is a unique, time-sensitive code for each transaction. Think EMV chip cards, but with a password to unlock them. 

Because of all this extra security, mobile payments don’t come with the same risks as card-not-present transactions. So even though technically the card is not present, mobile payments don’t require higher interchange fees (win-win for merchants all around).

It is important to keep in mind, however, that there are still risks associated with mobile payments. It’s not uncommon for people to misplace their phones or download malware, putting their card information at risk. However, in the eyes of a merchant, the financial responsibility for these methods of fraud is no different than if a customer were to use a stolen card.

Why should I accept mobile payments?

Even though accepting mobile payments will likely bring little (if any) additional cost to their business, some merchants may still be hesitant about actively offering the option to consumers. That hesitation is understandable. You may not expect that your customers will ever use it or that more traditional customers might be put off by the new technology. However, if recent trends are any indication, mobile payments are the future. A recent study projects that half the world’s population -- that’s 4 billion people -- will be regular users of mobile wallets within the next five years.

For a merchant, it just makes sense to adopt mobile payments sooner rather than later. You’ll enjoy increased security, and customers will enjoy increased convenience. It’s a win-win at no additional cost.

Curious to know how mobile payments could help your business? Are you looking for hardware with NFC technology? If so, contact the payments experts at SwipeSum. We'll help you find the best payment processing solution for your needs at the lowest rate, guaranteed! Click here to get started.