Small Business Mobile Point of Sale Systems: The Pros & Cons

Is the cash register following the fax machine into the Great Technology Graveyard? Without a doubt, the answer is yes—especially for small businesses.

Mobile point-of-sale (POS) systems, which combine a credit-card reader that communicates with a smartphone or tablet app, are clearly taking over. Shipments of new mobile POS devices in general are projected to increase more than 95 percent worldwide this year according to IHL Group, a global research firm. Analysts expect mobile POS usage to proliferate in department stores, restaurants, and other businesses both large and small.

But is a mobile POS system right for your small business? We look at the pros and cons, and share the main options you should consider.

The Pros of Mobile POS

1. Make it easier for customers to pay. Instead of having to stand in a check-out line or wait for the check, a sales clerk or restaurant server can swipe the customer’s credit card on the spot. It’s a timesaving convenience many customers will appreciate.

2. Sell more products. Not long ago, airline flight attendants would only accept cash for food and drink purchases or had to deal with cumbersome credit card transactions. Now, all they have to do is swipe your card on a mobile POS device—this lets airlines sell more food and beverages in flight. Nordstrom reported a 15.3 percent increase in sales after implementing mobile POS systems in some of its stores. If it works for them, it may work for your small business.

3. Give employees more flexibility. There are lots of ways a mobile POS can give sales-floor staff, restaurant servers, and others more flexibility. For example, a local retailer could set up an impromptu sidewalk sale. Sales-floor staff, stationed outside, could accept credit cards on the mobile POS system.

4. Stay close to customers. A mobile POS lets your workers stay with customers from the moment they arrive until they pay for their items or meals. This can help enhance the customer experience and build a rapport between customers and employees.

5. Simplify fees and expenses. Most traditional POS systems use a dedicated computer running POS software. The computer links to a cash drawer and a receipt printer. Typical costs for such systems run $1,500 or higher, along with fees charged by credit card companies. The bankcard fees usually include interchange fees (which is the largest chunk of the fee charged) plus assessments. By comparison, mobile POS systems that leverage smartphone and tablet apps simplify things by offering a single-rate. The combination of simplicity plus the mobility is why you often see mobile POS systems used by food truck vendors, home contractors, and many solo entrepreneurs.

6. No long-term commitments. Unlike some traditional POS system vendors, mobile POS systems, such as Square and PayPal Here, don’t require contracts.

7. Easy to set up and use. Mobile POS hardware and software is usually a breeze to set up and use, especially for people experienced with mobile devices.

5 Leading Mobile POS Vendors

Here are the main players in mobile POS and what they offer small businesses.

• Square, one of the most popular mobile POS systems, includes a free credit-card swiping device that attaches to an iPhone, iPad, or Android device. The Square app is also free. You pay 2.75 percent per credit card swipe or 3.5 percent plus 15 cents per manually entered transaction. Square charges no sign-up, activation, cancellation, or other fees.

• PayPal Here, a Square competitor, lets merchants and other small businesses accept customer payments via a free card-swiping attachment and free iPhone, iPad, and Android app. The charge is 2.7 percent per swipe and 3.5 percent plus 15 cents for manually entering or scanning credit card numbers. Like Square, PayPal doesn’t tack on additional fees. To sweeten the deal, PayPal offers small businesses a debit card with 1 percent cash back on certain purchases.

• Intuit GoPayment, from the makers of QuickBooks, offers two plans for its card reader/payments service. The pay-as-you-go plan incurs no monthly fees and charges a 2.75 percent swipe fee or a 3.75 percent manual entry fee. For $13/month, you’ll pay a 1.75 percent swipe rate and 2.75% manual entry fee.

• PayAnywhere is a mobile card reader/POS service for iOS and Android devices. North American Bancard, which was founded in 1992, provides the service. You pay 2.69 percent per swipe or 3.49 percent plus 19 cents for a manually entered transaction. Or, for $13/monthly, you pay 1.69 percent per swipe and 3.69 percent and 19 cents for manually entered transactions.

• Groupon Gnome (pronounced “gee nome”) is the latest entry, announced May 2014. Gnome is replacing Groupon’s free Breadcrumb POS and comes with contact management tools, to serve you prompts and reminders about repeat customers. The iPad-based system serves as an all-in-one cash register and also lets customers redeem purchased Groupon offers. Gnome costs $10 monthly, and the company says that per-transaction fees will be competitive.

Unlike the aforementioned contenders, Gnome is designed to be a stationary cash register, much like the Square Register, even though it’s based on a mobile device (an iPad). Also, keep in mind that with most services, you’ll need to invest in the iOS or Android mobile devices, such as an iPad.

The Cons of Mobile POS

1. Security can be a concern. How safe is the mobile POS service, and will your customers trust it? A warning on Experian’s website may give you pause:

“Thieves prefer to target small to medium-sized businesses (SMBs) because many lack the resources or expertise to manage cyber security. Retailers are especially easy targets for cyber criminals who look to hijack credit card data, but customers aren’t the only victims. Among SMBs that suffer a breach, a staggering 60 percent go out of business after six months.”

Shoppers are particularly aware of security concerns in the wake of the late 2013 Target POS data breach. Older clientele may feel especially uncomfortable having their credit card swiped with a mobile card reader.

For any mobile POS system you choose, make sure you understand its security policies and procedures. Also, convey the security information to all customer-facing employees, so they can reassure concerned customers (as much as possible).

For more security information, follow these links:

• Square security
• PayPal Here FAQs
• Intuit GoPayment Security FAQs

2. Will you get customer service? Make sure the mobile POS service you sign up with offers the kind of customer support you’ll need. For example, Entrepreneur magazine has criticized Square for offering “little in the way of human tech support.” Meanwhile, Groupon touts its 24/7 live support for Gnome. 

3. Will you get your money right away? Another complaint about some mobile POS services is that they may hold onto your funds for longer periods of time, compared to more traditional POS systems.

For example, CardFellow’s website says of Square: “Funds are often held without notice, and Square is notorious for providing little, if any, customer service to keep people informed about the progress of a fraud investigation.”

The Merchant Maverick blog also noted that due to fraud concerns, PayPal “may withhold some of your funds or even freeze or shut your account down,” if your business falls into the high-risk category.

4. You need a reliable Internet connection. If your business’s Internet connection is slow, unreliable, or it goes down, you may be unable to successfully or easily process transactions.

[Author’s note: My general practitioner tried using a mobile card reader to accept co-payments. But cellular service in his office is virtually non-existent, and his Wi-Fi network was sluggish due to the thick walls of his office’s old building. Eventually, my doctor’s office went back to accepting cash and checks only.]

You Can Start Small

If you already have a POS system in place, you don’t have to ditch it to test a mobile POS service. You might sign up for Square or PayPal Here, for instance; get the free card readers and apps; and test them with a few friends. Then, when you decide which one to go with, roll it out slowly, starting with your younger, tech-savvy customers.

James A. Martin is a marketing consultant specializing in SEO, social media, mobile apps, and business blogging. Follow him on Twitter and Pinterest.