In June, Square secured $100 million in a Series C financing led by Kleiner Perkins Caufield & Byers. The company is reportedly valued at more than $1 billion, but it’s not the only game in town. Intuit’s GoPayment mobile card reader includes the ability to integrate with Intuit’s Quickbooks accounting software. VeriFone Systems’ PAYware Mobile and AppNinjas’ Swipe also pair card swipers with smartphones.
Another technology is promising further innovation. Near-field communications, or NFC, allows consumers to tap a smartphone on a specially designed terminal to make a payment. Google Wallet is probably the best-known NFC payment system. Currently available only on the Samsung Nexus S 4G smartphone, it works with Citibank’sMasterCard PayPass and the Google Prepaid Card.
eBay’s PayPal is also exploring this space by allowing Android users to make person-to-person mobile payments using NFC technology, a solution that could also appeal to small, local merchants.
Analysts say for most small businesses, however, NFC isn’t ready for prime time, mostly because so few merchants and consumers have access to the technology.
“NFC payment won’t be adopted by the mass market before 2015,” says Sandy Shen, research director at Gartner. “NFC requires users to change payment behavior, relies on the service providers to support the wallet infrastructure, and relies on merchants to invest in POS [point-of-sale] terminals. Small businesses should be clear about how they can benefit from different technologies and not rush to new technologies because everyone is talking about them.”
Charles Golvin, principal analyst at Forrester Research, notes that the hurdle a person-to-person NFC solution such as PayPal Mobile faces is the fee it charges users to make a payment. In the long run, he says, NFC will dominate payments as it becomes more widespread and point-of-sale NFC readers become more affordable for businesses of all sizes. Erply, a maker of retail point-of-sale and inventory management software, recently introduced a $50 card reader for the iPad that also accepts NFC payments.
Golvin adds that the key will be how small businesses use the intelligence behind NFC to generate business.
“You could walk by an NFC-enabled billboard and wave your phone over it, get the promotion delivered, be driven directly to the merchant website to tell you more about what you just expressed an interest in,” Golvin says. “The challenge for the small merchant isn’t so much having the payment acceptance of this technology. It’s going to be much more in the back end, in these intelligence systems that can connect to that reader and say, ‘I recognize you as a loyal customer, here’s something I’d like to offer you.’ ”