We are often asked to suggest processing solutions for mobile merchants. Recently more and more of those conversations are focused on payment applications for the iPhone. Much of the buzz can be attributed to VeriFone’s recently launched PAYware Mobile iPhone application; the first payment app with a card reader available for the iPhone clearly distinguishes it from all others.
In our experience, we have found accepting card payments on a smart phone to work best in a sales environment where a single user will operate the device, one customer at a time. And the PAYware Mobile solution has received positive client feedback from our early adopters. The thing about early adopters is that they want the latest technology regardless. But for others, they want to analyze their options.
Before there were smart phones and apps, there was a payment service known as Touch Tone Capture (TTC). For many mobile merchants Touch Tone Capture remains a viable option. So let’s compare, touch tone vs. the iPhone.
Touch Tone Capture (also known as Dial Pay) offers a simple card processing solution for mobile merchants. Using any touch tone telephone, you speed-dial an 800 number that connects you to an interactive voice response system where you use your telephone’s keypad to enter the card number, expiration date and the dollar amount to request an authorization code. TTC service is a full featured system and supports AVS, return, force, authorization only, and void functions. Merchants use a manual imprinter to make an imprint of the cardholder's card and obtain the cardholder’s signature.
With the PAYware Mobile app for the iPhone, merchants swipe their customer’s card through a secure card reader and enter the dollar amount. Upon approval, the customer will sign the iPhone screen and can opt for a copy of the receipt to be emailed to them.
VeriFone's encrypted card reader plugs into the iPhone dock connector and cradles the phone. PAYware Mobile uses VeriShield Protect to encrypt card data during the card swipe process, so no sensitive data ever reaches the iPhone payment app. This eliminates hand keying card numbers, speeds transaction times and reduces errors. The signature capture feature securely archives customer receipts should they need to be retrieved in a dispute for greater chargeback protection. In addition, merchants can qualify for lower swiped card Interchange rates.
For more on PAYware Mobile, the iPhone reader and service plan pricing visit: http://verifone.merchantrates.com/verifone.aspx
Break-Even Fee Analysis
Entering the 800 TTC phone number into your speed dial is free. By comparison, PAYware Mobile has a $49 set up fee.
With PAYware Mobile you will need to purchase a card reader. Currently this will run you about $119 plus shipping. A new manual imprinter, merchant plate and 200 sales drafts cost about $35, but you will need more slips over time.
PAYware Mobile costs $15/mo. and $0.17 per transaction, but with the card reader you are able to qualify for swiped card Interchange. TTC costs $0/mo. and $0.30 per transaction, yet your transactions will qualify at the higher key entered Interchange. For our example, we are going to round the Interchange difference between swiped and keyed transactions to 40 basis points.
Here are three calculations base on different average tickets.
|Mo. Sales Volume||$3,250.00||$3,250.00||$2,850.00||$2,850.00||$2,300.00||$2,300.00|
|Average Ticket||$ 200.00||$ 200.00||$ 100.00||$ 100.00||$ 50.00||$ 50.00|
|Per Trans||$ 0.30||$ 0.17||$ 0.30||$ 0.17||$ 0.30||$ 0.17|
|Monthly Fee||$ 0.00||$ 15.00||$ 0.00||$ 15.00||$ 0.00||$ 15.00|
|~ Keyed Surcharge||0.40%||---||0.40%||---||0.40%||---|
|Mo. Break-even||$ 17.88||$ 17.76||$ 19.95||$ 19.85||$ 23.00||$ 22.82|
This sample analysis assumes all transactions are swiped. The analysis will change if you will use your iPhone to process phone orders, invoices or accept unreadable card transactions where the mag-stripe is damaged.
As you can see, merchants should examine their monthly sales volume when deciding to implement a swiped card solution and analyze the impact from lower Interchange rates. If you are a seasonal merchant, fluctuating between months of peak sales then months of no sales, the no monthly fee of TTC can be appealing. However, consider the benefits of faster transaction times during your peak times, especially if you might lose sales if you are unable to get a line of customers processed.
Protecting against disputes and chargebacks
Merchants should understand that card transactions are a convenient form of payment, not a guaranteed form of payment. Three things are required to help protect merchants from card holder disputes and card issuer chargebacks.
- Proof that the card was present. This can be accomplished by swiping the card and transmitting the swiped card data with the sale. Another way to prove the card was physically present is by making a manual imprint of the raised information on the card itself.
- Obtain an electronic approval code.
- Obtain a signature of the cardholder on a sales draft (certain transactions do not require signatures) and if no refunds are allowed, “All Sales Final” must be printed on the receipt near the signature line.
Merchants must retain this documentation and if requested must be able to provide this proof within a limited time frame.
Using TTC and obtaining manual imprints of all credit and debit card sales and safely storing imprinted sales drafts for easy retrieval is obviously not as convenient as the PAYware Mobile app where the signature capture service remotely archives the customer receipt for electronic retrieval anytime it is needed. Note: signing the screen to capture the signature does you no good without the card swipe or getting an imprint of the card. Consider this value as part of your equation when buying a card reader for your iPhone.
When selecting a mobile processing solution, in addition to the cost, merchants should consider their sales volume, chargeback risk, card data security and operational efficiency.
If your sales volume is low, you know your customers and you are not concerned about chargebacks, setting up Touch Tone Capture service is certainly still a good option to avoid monthly gateway fees. The PAYware Mobile iPhone app is recommended for mobile merchants where the savings from qualifying at swiped card Interchange rates offsets the monthly fees. Furthermore, it is easy to justify the cost of VeriFone’s card reader when you consider the speed, security and convenience of swiping cards for greater chargeback protection with signature capture and electronic receipt storage.
Starting this month, Apple Retail Stores in the United States and the Apple Store online will begin selling the PAYware Mobile reader. Other iPhone retailers are likely to follow. However, please use caution. Remember, you will still need a merchant account to make the iPhone payment app and card reader work. Don’t forget to shop around and read the fine print before choosing your payment processing partner. If you don’t, you may find yourself in a three-year contract with expensive early termination fees, non-qualified surcharges and an impressive fee schedule including monthly minimum billing.
Vantage can establish merchant services for your business with a variety of wireless devices and solutions including PAYware Mobile and Touch Tone Capture. See http://vantagecard.com/solutions/wireless for a complete discussion on wireless options. For an instant merchant Interchange rate quote, use the Merchant Rates quote calculator.