It was not long ago that a small business had to make the choice whether or not to accept credit cards. In recent years that decision has been made for business owners as competition and consumer-buying habits started forcing even the smallest shops to accept some form of card payments. As fewer people carry cash and technology continues to innovate, the future of payment processing may look very different in the near future.
A Brief Description of the Current Payment Processing Landscape
For the past few decades, merchant services has been an industry shrouded in secrecy and deception. It is riddled with difficult to understand contracts, hidden fees and often full access to business checking accounts to remove or add funds as they see fit.
Talk to a few small business owners and you are bound to find someone who resents the credit card processing industry and has no problem telling you about their horror stories. Unfortunately, this has been the norm for decades and some companies still operate in this manner.
New Players in the Payment Processing Game
As technology as grown and competition for credit card processing dollars have continued to heat up, there are a lot of new faces entering the arena and doing so in a manner that is atypical from the usual industry veterans.
Square Up – In 2009, the Co-Founder of Twitter, Jack Dorsey, introduced a breakthrough device that allows 
individuals and businesses to swipe and process credit cards directly on their iPhone or Android phone.
Square cannot claim to be the first company to allow this, however, what makes them stand apart is the simplicity of the contract (or lack thereof) and the fee structure. Square has no contract, does not have any monthly fees and only changes when a card is swiped or keyed in. Currently they charge 2.75% of the transaction for each swiped card.
The beauty of Square is it allows small businesses that did not have the resources prior to enter the credit card acceptance game. Many businesses, especially those that may not transact every month, or would only process in the hundreds of dollars would be burdened by the heavy costs associated with setting up a merchant account.
Google Wallet – On the flip side of the payment world, Google has partnered with Citibank to create a new product called Google Wallet. GW allows consumers to attach a credit card number to an embedded near-field communication (NFC) chip in their Android phone, which gives them the ability to make payments by swiping their cell next to a chip reader.
NFC technology has been around for about a decade, and many merchants in the US already have the appropriate equipment to read it. GW will be tested in New York City and rolled out nationwide in 2012.
This possible shift in consumer credit card habits and processing capabilities will give small businesses looking to get on the forefront the opportunity to capture tech-savvy customers that have adopted the new payment methods. Unfortunately this technology will have additional costs associated with it, but merchants getting out in front of the paradigm shift should reap rewards the laggards will surely miss.
Author: Eric Stauffer, who reviews credit card processing companies like Square Up and ProPay. He also is a consultant for small businesses and helps them negotiate merchant service contracts.
