Getting Hip Over Square


Mobile Merchant card payment points bloom

By Katie Kuehner-Hebert

The mobile point-of-sale merchant credit and debit card payments system by Square Inc. has received tremendous media buzz and considerable adoption by Main Street’s mom-and-pop businesses.

Despite their potential disadvantages (merchant fees, payments security and lack of support being among the most significant), upstart nonbank merchant payments systems have posed significant competition for community banks—for some of their most important commercial customers. Fortunately, a growing number of mobile merchant systems are available for community banks to offer to retail business customers—systems that can provide much better options for retailers than the nonbank systems available.
Here are several options for community banks.

UMS Banking. This Glendale, Calif., company’s payments processing provider, formally known as United Merchant Services of California Inc., offers its bank agents access to providing a mobile POS payments service through VeriFone’s Payware and Mobile system, called USA ePay’s PaySaber.

To use the services, merchants download Apple iOS and Android interfaces from their respective app stores, plug in a small “swiper” card reader received from the merchant services provider, and then log in to activate their account, says David Jensen, the company’s past president and current consultant. Mobile POS providers such as VeriFone have end-to end encryption on all transactions.

Merchants that opt for providers like Square only process payments occasionally or process low-ticket transactions for $5 or $10, Jensen says. However, for merchants with monthly processing volumes of $5,000 or more, or for individual high-dollar transactions, bank solutions are better as the base rate is typically lower. Moreover, Square has no customer-service help desk that merchants can call with questions, whereas merchant services companies do.

“There is additional peace of mind working with your bank when you have a person to talk with to handle disputes and charge-backs or any issues regarding deposits or debits from your business checking account,” Jensen says. Square also doesn’t offer merchants transaction security protection for their account—“if a merchant is breached, they are on their own.”

ePaymentAmerica. This bank payments services company in Memphis offers mobile POS services. The company is giving banks “exclusive territories” to provide its system to merchants within those territories, says Debra LeJeune, director of operations. As part of its sales model, the company places sales and technical staff within those territories, helping a bank’s merchant customers with equipment setup and training. ePaymentAmerica also offers same-day funding and personalized 24/7 service.

Through the Square app, a merchant’s funds are potentially held for up to a week, there is no phone number for service or technical support, and there is no charge-back or risk management support, LeJeune says. If a merchant needs assistance, it must email a request to the company and wait for a call back.

Shazam Inc. The Johnston, Iowa, company’s payments services network offers mobile POS services to its bank processing clients in partnership with core processor First Data Corp. in Atlanta. “We have superior security measures over nonbank providers, using various methods of encryption that are fairly sophisticated, and employ end-to-end strategies to stop fraud,” says Dan Kramer, Shazam senior vice president of marketing and merchant services.

Kramer says there is “tremendous amount” of development being done in the mobile payments market around merchant POS systems, and banks are struggling to keep up with the functionality of nonbank offerings. However, he says, retailers also want customer mobile payments to be integrated into their existing POS systems, instead of having to upload sale transactions conducted on mobile devices onto their systems. A POS system fully integrated with a bank could also give merchants additional benefits, such as automatically updating their inventory from mobile payments data.

Shazam plans to begin offering more integrated bank and merchant payments services capabilities in conjunction with First Data within the next six months, Kramer says.

“Right now, the mobile services that many banks are utilizing are just authorizing debt and credit card transactions, and are behind in fully integrating mobile into their POS systems,” he says. “They need to partner with a merchant service provider that has the technology to compete with the large nonbank providers. That will get them to market faster with the products and services that retailers want.”

Katie Kuehner-Hebert is a writer in California.