Accepting credit cards has never been cheap or easy for small businesses. Besides the initial cash outlay of a few hundred dollars for hardware, merchants must pay a fee of 2 percent to 3 percent per card swipe, plus a laundry list of monthly and annual costs that banks, credit card companies and merchant service providers tack on.
"They send us the most complicated, hard-to-understand statement ever," said Ben Van Leeuwen of Van Leeuwen Artisan Ice Cream, a 60-employee Brooklyn firm with six ice cream trucks and three retail locations. The company, founded in 2008, started accepting credit cards a year and a half ago. "I can't really spend the hours and months trying to figure out what it means," he said. According to the National Retail Federation, merchants pay about $30 billion each year for debit and credit card purchases, most of which goes to the banks issuing the cards.
Merchants who have invested in cloud-based point-of-sales systems that support swiping credit cards via smartphones or iPads are finding their way around some of the more exorbitant upgrade costs. "New hardware will be needed; that's an undeniable truth about EMV," said John Berkley, vice president of product at Mercury Payment Systems, a payment solutions company based in Durango, Colo. "If you have a piece of hardware that only accepts magstrips, the smaller it is to replace, the better," he said. "When it's a software system with a peripheral attached to it that can easily be swapped out, that's an easier way to make [the upgrade] happen."
(Read more: Time to put chips in U.S. cards: MasterCard)
The costs to switch to EMV will likely be lower for users of Intuit's GoPayment and Square, wireless payment technologies featuring card readers and software that integrate with smartphones and tablets. Both companies already support chip card requirements in Canada (Square) and the U.K. (Intuit).
But even as these new technologies, like chip cards and wireless payment, promise a higher level of security with continually evolving encryption measures—for example, like many of its competitors, the GoPayment card reader encrypts credit card numbers and then decrypts them on Intuit's servers so no personal data is ever captured in the software hosted on a merchant's phone—fraudsters will likely find a way to hack into them.
"In other countries where they have required chip-and-pin in brick-and-mortar shops, the fraud risks have moved online," said Jason Richelson, founder of ShopKeep POS, a purveyor of cloud-based point-of-sale software.
Or as Bob Sullivan, fraud expert and contributor to Credit.com, put it: "Here's the thing about crime: It's all a matter of odds. There's no way to prevent it."
Small merchants face a double-edged sword when it comes to fraud protection: They are less at risk than a major national chain like Target, but they also have a known tendency to spend less than their bigger counterparts to protect digital information, making them more susceptible to attacks.
The first defense against risks associated with wireless—things like malware targeted at mobile devices and the lack of time-tested fraud controls configured specifically for mobile—is education. "Most merchants don't spend the time or effort to get educated, and that's to their detriment," said Steve Casco, founder and CEO of Cardnotpresent.com, an online publication that covers issues in the e-commerce and mobile payments industries. "We're trying to bring our readers into the 20th century, let alone the 21st."
The majority of small firms rely on their vendors for infrastructure security updates, and partnering with a well-known tech company can help ease client worries about security weaknesses with new technologies. "That's one of the reasons why we wanted to go with a company like PayPal," said Justin Joseph, a partner and CFO of EJ Blooms, a start-up floral design firm in Manhattan that only accepts plastic via PayPal Here to serve clients, including Viacom and the New York Historical Society. "Most people will have heard of it and know they can trust [the system]."
When Silverglide first deliberated on the decision to go straight to cashless, he asked himself, "What's the harm of getting rid of cash already and see what it does for our operation?"
It did quite a bit. Despite the occasional customer grumbling about not being able to use cash, Split Bread has seen well over double-digit sales growth month over month since opening a year and a half ago. Silverglide attributes some of that growth to fostering an electronic payments–only business, which allows for quicker customer throughput—if they don't want to stand in line and swipe their credit card to pay, customers can seat themselves at a table, scan the QR code with their smartphone and order without having to interact with staff—and less time and labor wasted with counting, watching over and depositing cash.
—Maggie Overfelt, Special to CNBC.com