How Mobile Credit Card Processing Works and How to Choose the Best Mobile Credit Card Processor?

Just so, you can differentiate the mobile processors from traditional ones, let's list a few of them here: Square, Cartwheel Register and EMS+ are good examples of mobile-focused processors.

Mobile credit card processing, sometimes also referred to as mPOS (mobile point of sale), gives you the ability to accept credit and debit card payments using your phone or tablet instead of a credit card terminal or point-of-sale system.

The process is identical to credit card processing other than the difference in hardware used to capture the information on your customer's card. When you run a transaction, the information on your customer's card is routed securely to the processor, the credit card network, your customer's issuing bank and finally, your bank account where the amount of the transaction, less the processing costs, is deposited. Here is a step by step walkthrough of the setup.

To start using your mobile devices to process credit card transactions, you need to sign up for an account with a credit card processor that offers mobile credit card processing. You then download and install an app onto your device, which needs to be connected to the Internet via either Wifi or cellular service for the app to allow you to accept cards. Often, The card is swiped using a small portable credit card reader, called a swiper or dongle, attached to your device by plugging it into the earphone jack, some newer devices connect via Bluetooth as well.

In this article, SlashMyFees will share the results of our extensive research in order to assist you in understanding the mobile arm of a very complicated industry so that you can choose the mobile processor that is the best fit for your small business. This article includes information about the following:

  • Mobile vs. traditional credit card processing.
  • Processing costs and fees
  • Tips to lower your costs
  • Contract advice
  • Data security requirements
  • Equipment needs
  • The best recommendations for specific mobile credit card processing setups

Advantages of Mobile Credit Card Processing

Mobile credit card processing may be a good fit for you if your business is mobile or doesn't operate out of a traditional brick-and-mortar location, such as a food truck.

It is also a good option if you're opening a new business or if you're not sure how much you will actually be processing each month. In such cases, a mobile credit card processor that doesn't charge fees and only charges processing costs can be a good option.

Another reason to use mobile as a processing solution is if you typically accept cash or do most of your billing via invoicing and occasionally need to accept credit cards.

Low Upfront Setup Costs

Mobile processing has less expensive upfront costs if you already have a phone or tablet. Most processors provide you with a free card reader when you setup your account. If you have to purchase a swiper, some processors, like Square, give you a processing credit. Some processors, don't require you to use any additional hardware to securely process transactions; all you need is the app and the technology already built in to your phone.

Mobility for your business

You can accept credit cards wherever you are. This capability makes mobile credit card processing ideal for service professionals who work in the field. It's also a wonderful option if you're a merchant who attends trade shows, consumer shows or local farmer's markets since you can accept credit cards as long as you have Wi-Fi or cellular service. You want to add additional checkout options. You can mobilize your sales team with card readers and phones or tablets to expedite the checkout process for your customers as a less expensive alternative to wireless credit card readers.

Ease of setup and use

The solution often looks minimal and sharp. Instead of a bulky cash register and point of sale system, you can conduct your transactions entirely on your phone using an app and a swiper. If needed, you can add on a cash drawer and printer. This can be beneficial when you're on location and have to tote your equipment or if you have limited checkout space.

Disadvantages of Mobile Credit Card Processing

Although less expensive than standard credit card processing, these are some of the disadvantages to consider:

Processing time and receipts

It may take longer to process transactions. If you opt not to add a printer, it may take extra time to capture an email address from each customer so that you can send the receipt electronically instead of quickly printing one out.

Customer Service

Customer support is less robust. Customer service may not be as readily available as it is from standard credit card processors. Most mobile processors have limited customer service hours and don't provide their customers with dedicated account reps. Some do not offer phone support. Our current partners at SlashMyFees offer 24/7 support which is extremely helpful.

Existing hardware requirements

You need to have a mobile device that is compatible with the apps. If you have an older cellphone or one that runs on something other than iOS and Android, you may need to upgrade to a newer model in order for the apps to work.

Customer Interaction

Your customers will be handling your mobile device. You need to be comfortable with letting people touch and even hold your devices in order to view and sign their receipts.

The Difference Between Mobile and Standard Credit Card Processing

Mobile credit card processing differs from traditional credit card processing in that most mobile processing companies offer pay-as-you-go or month-to-month service and there are fewer fees. Many have a flat-rate pricing model that is easy to understand and enables you to estimate your processing costs. It's usually the most cost-effective processing option for businesses that process $3,000 or less per month. If your business processes more than $3,000 per month, a traditional credit card processor may be able to offer you better rates.

Mobile credit card processing can be used as a stand-alone service and serve as your sole means of accepting credit and debit cards. It can also be an add-on service if you have a traditional credit card processing account as most traditional credit card processors can easily add this capability to your existing account and provide you with card readers for your mobile devices. Mobile credit card processing is available from payment facilitators, ISO/MSPs, and direct processors.

Payment Facilitators, ISO/MSPs & Direct Processors

Many mobile credit card processors, such as Square and PayPal Here, are payment facilitators, or merchant aggregators, that sponsor merchants under their master merchant accounts. Other processors, such as Flagship ROAMpay and Credit Card Processing, are independent sales organizations or merchant service providers (ISO/MSPs) that can provide you with your own merchant account. Direct processors, such as Chase Paymentech and Elavon, can also provide you with your own merchant account.

There are pros and cons to working with each types of processor, and whether you need your own merchant account or not depends on various factors, including what kind of business you own; how much you process; and whether you want to process online, on-the-go or in a more traditional retail environment.

Payment Facilitators

Many mobile processors are payment facilitators that don't require you to open your own merchant account. One of the benefits of working with a payment facilitator is that the setup times are quick. You don't need to go through the same underwriting process as you would to get a merchant account through an ISO/MSP or direct processor. Often, payment facilitators can approve your account and get you set up to start processing the same day you sign up, and they frequently provide you with a free mobile card reader after you complete the application process.

Account aggregators also tend to have a simple pricing structure and often don't charge monthly fees or have monthly minimums. Since your account is combined with others under the umbrella of a master merchant account, you aren't responsible for PCI-compliance certification. This is because the aggregator is the merchant of record and assumes all responsibility for ensuring that equipment and software meet security standards.

Account aggregators may have maximum processing limits and so may not be ideal for businesses that have aggressive plans for expansion. Yowza Merchant, for example, only allows its level one merchants to process $4,000 a month with a $300 maximum per transaction. Visa requires merchants that process more than $100,000 a year to get a merchant account, even if you choose to continue processing through the aggregator. Another drawback of payment facilitators is that many of them lack personalized customer service, and some companies only provide customer support through email.

ISO/MSPs & Direct Processors

Most ISO/MSPs and direct processors also offer mobile processing, and you can choose to use it as a stand-alone service or in conjunction with traditional retail processing. These processors set you up with your own merchant account, which may be a better choice if you plan to process in a retail setting or if you plan to expand your business.

It may be more cost effective to work with this type of processor if you process more than $3,000 per month, since you can often choose from additional pricing models, including interchange-plus, which is the pricing model recommended by industry experts and SlashMyFees. Standard processors may also have more flexibility with their processing costs. After processing for a certain period of time, many processors are willing to audit your processing costs and you may qualify for lower rates.

Companies that offer traditional credit card processing tend to provide a higher quality of customer service. Many of them, including Flagship ROAMpay, Cayan and Chase Paymentech, assign you a dedicated account rep when you sign up.

One of the drawbacks to processing with an ISO/MSP or direct processor is that they can take longer to set up. You may be required to have a business license and submit documentation, such as business or personal bank statements or marketing material. Some processors may also require you to submit to credit checks. The underwriting process can take longer, and you may have to wait several days before you can begin accepting payments.

ISO/MSPs and direct processors tend to charge more fees than aggregators do. Nearly all of them charge a monthly fee and a PCI-compliance fee. The PCI-compliance fee ensures that your account complies with security standards and that you aren't storing your customers' data. Be cautious of processors that set you up with a merchant account but offer pay-as-you-go plans. You may still be on the hook for a PCI-compliance fee and may have to pay it based on your transaction volume.

What to Expect From Your Mobile Credit Card Processor

Whether you choose to work with a payment facilitator, an ISO/MSP or a direct processor, you should expect to be able to accept all major credit and debit cards, including Discover and American Express. You should receive a free basic card reader or be able to purchase one at a low cost without being required to sign a lengthy contract. The processor should provide you with service on a pay-as-you-go or month-to-month basis, and you should be able to cancel your account without incurring an early termination fee or cancellation penalty. You should be able to contact the processor for customer support by email or phone.

The Evolving Mobile Credit Card Processing Industry

As the credit card processing industry evolves to include better transparency in pricing and increased security through EMV regulations, the mobile credit card arm of the industry is responding by introducing new equipment and payment capture technologies.

New Equipment

Processors are updating dongles to EMV chip and magnetic stripe hybrids that enable you to capture card data by dipping the EMV chip into the device and by swiping cards that only have the magnetic stripe. The newest technology connects to your device via Bluetooth and enables you to accept mobile wallets, like Apple Pay and Google Pay, that use near-field communications (NFC) technology to transmit payment data. Some of the new devices also include a PIN pad.

No Equipment Options

Some of the newer mobile payment technologies use just your cell phone and an app to capture the numerals on your customers' credit cards; no additional equipment is needed.

Mobile Credit Card Processing Fees

Mobile credit card processors typically charge fewer fees than full-service credit card processors. However, if you procure your mobile credit card processing service through a full-service processor, you can expect to pay many of the same fees that you would pay for retail processing.

Fewer Fees Than Standard Credit Card Processing

Processors that charge various fees typically have lower processing costs than those that don't charge any fees, which means that if you process a higher volume of sales each month, one of these companies may save you more money than one with higher costs even if they don't charge fees. Conversely, if you process a small volume of sales each month, it is more cost effective to choose a processor that only charges processing costs and doesn’t charge fees. The processors that charge a percentage rate only with no per-transaction fee are especially good options if you process small tickets.

Monthly Fee

Also called a statement fee, this charge typically covers monthly reports, customer support and any account maintenance that you may require. Usually, this fee is charged by full-service processors rather than those that are mobile-only processors. Less than half of the processors we reviewed charge this fee. $10 per month is average for this fee. If you require paper statements, it may cost you extra. For example, Chase Paymentech charges an additional $5 per month for this service.

Monthly Minimum

The monthly minimum is the minimum amount of processing costs that the processor expects you to generate each month. Although some processors count the full amount of a transaction toward this cost, most only count the processing costs: the percentage of the sale and per-transaction fee that you pay the processor. If the processor that you choose to work with has a monthly minimum, it's important to ask how the minimum is calculated and how much you need to process in order to meet that amount.

If you fail to process enough transactions to meet the minimum, the processor charges you the difference between the amount of the minimum and the processing costs that you generated that month. For example, if the monthly minimum is $25 and you generated $15 in processing costs, the processor charges you $10. Some processors charge a $25 fee.

Tips to Lower Your Mobile Credit Card Processing Costs

You can do several things to lower your mobile credit card processing costs or to ensure that you're getting the best possible rate.

Ask If Fees Can Be Waived

Before you sign your contract, read it and identify the fees that are listed. Call your account rep and go over the list to see if he or she can waive any of them for you. Make sure to get any changes noted on the contract or get a waiver for them. If you've already signed an agreement, you may not be able to get any fees waived since you've already agreed to pay.

Review Your Statement

It's important to review your statement each month; by familiarizing yourself with the fees and costs that you pay each month, you can more quickly spot any changes to your bill, such as higher rates or additional fees. Since most processors don't provide pricing guarantees, even if you sign a contract, it's up to you to watch for these changes.

Request a Pricing Review

When you're processing a higher volume than you were when you first signed up for your account, it can be worthwhile to call your customer service rep and request a pricing review. Your rep can assess your account to determine if you qualify for a lower rate. If your pricing plan is tiered, your rep may analyze your charges to make sure that your account is optimized to give you the best possible pricing.

Visit SlashMyFees

Our rates are regularly updated, and we strive to partner with the best credit card processors for all your needs. A regular visit to the site will allow you to get the best rates available to you without having to comparison shop in multiple places.

EMV & Mobile Credit Card Readers

Although there is some debate as to whether mobile credit card readers are required to be EMV ready, most mobile processors either have an EMV-ready reader or are in the process of producing one. When asked, Visa told that the merchant's card reader must be EMV capable or the merchant would be liable if a counterfeited card was accepted.

If you choose a mobile processor that uses your phone's camera to conduct the transaction, and it doesn't require a physical card reader, the EMV liability shift doesn't apply. This is because this type of transaction is considered a "card not present" transaction and uses different technology to secure your customers' data.

Mobile Processing Equipment

One of the chief appeals of mobile credit card processing is that it requires very little equipment, which makes it a very cost-effective option. Standard credit card processors require you to purchase a terminal or point-of-sale system to begin processing. To process cards on a mobile platform, all you need at the bare minimum is a phone or tablet with cellular or internet service. Even if you purchase an EMV-capable card reader or accessorize by adding a cash drawer, you pay much less for equipment with mobile credit card processing than you would for full-service processing.

While a lot of the processors we reviewed offer free swipers, they are not necessary to accept mobile credit card payments. Some processors offer hardware-free solutions, and all processors enable you to manually key-in card information if you don't have a swiper. However, you should be aware that many processors charge a higher rate for keyed-in transactions.

Apps & Payment Gateways

Unlike traditional credit card processing, to process through your phone, you use a payment gateway. Most mobile processors include a gateway with the mobile app. All of the processors we reviewed include free apps. Some processors' apps include extra features for the tablet versions of their products, including the ability to scan barcodes.

Credit Card Readers

To get the best rates for most of the mobile payment companies we reviewed, you need a card reader. Most processors we reviewed offer the first basic credit card swiper for free. If you lose the card reader or need to purchase additional units, most processors charge you for every swiper after the first one. Costs for basic swipers range from $10 to $60 though EMV-capable card readers often cost more.

Mobile processors are developing new technologies that eliminate the need for physically swiping cards. Processors such as Cartwheel Register use apps that capture your customer's credit card information using your phone's camera instead of a swiper dongle. Since the card is not swiped, it is treated as an eCommerce transaction and isn't subject to the EMV-liability as mentioned above.

Compatible Operating Systems & Phones

The most important piece of equipment that you need to begin mobile processing is a phone or tablet. When looking for a processor, you want to make sure the one you choose is compatible with the operating system, make, and model of your phone or tablet. The majority of the processors we reviewed work with both Apple and Android, although Cartwheel Register only supports iOS devices. Most processors have lists of compatible devices on their websites, or they can email their lists to you upon request.

Accessories & Extra Features

In addition to card readers, many processors offer other accessories, including receipt printers, cash drawers and even full point of sales systems. These accessories can make it easier to accept cash and credit, provide printed receipts to customers that prefer them over emailed receipts, and give your business the functionality of a full checkout station. The accessories offered by mobile processors tend to be less expensive than similar products used with standard retail processing.

Mobile processors include a variety of extra features with their services. The most popular features are capturing signatures directly on the screen and emailing customers their receipts. This feature can help you save money because you don't have to buy a printer and receipt paper. Other extra features that can help your small business include analytics programs that give you insight into your sales data, marketing tools to help you promote your business and scheduling apps that help service-oriented businesses set appointments with their customers.