22 Dec 2012

Accepting credit cards as easily as using them?

About 2 years ago I was rather taken by a company called Square who allowed you to take credit card payments using your mobile phone. It used a little dongle you plugged into the headphone jack on your phone and an app available for free on various app stores for various devices. The major downside - not available outside the U.S of A.

Last month a new company from Europe launched in the UK. Enter iZettle. They basically offer the same service and rates as Square do and they have a much better card reader for iPhone :)

So, what's the big idea?

Well, if you want to get one of them card reader do-hickies from the bank they are very expensive. You generally have to pay for the device over a certain period of time and this is a service fee. You also pay a percentage of your transaction, and you have to submit to various banking audits and regulations... Mostly this means that taking credit cards are outside the realms of most of the general public.

A huge proportion of the community have a smart phone. So a service that would take care of all the regulatory stuff, and not pass on the cost is quite a good idea. It means for people that just want to take an occasional credit card or deal with the pizza man when he arrives by sorting out the split but no one has cash, then this is a neat idea.

And the costs?

So a 3G card reader from the bank will cost you about £350 - £500 per year just to rent the device. You will then pay between 3% and 5% per transaction depending on the card and the deal you got. If you don't make enough sales in a period you may also have to pay an "inactivity fee" which can vary from £10 - £30 per month. You also have to go through an audit process every year and sign paperwork a fair bit.

iZettle and Square just charge you a flat fee of 2.75% per transaction. Square are also a little more mature in the industry and offer a monthly fixed fee if you're making a lot of sales.

And the downside?

Well, the cynic in me might suggest that because Visa are backing Square the process for accepting Visa by iZettle is overly complex and relies on the customer having a smart phone with a data connection.

iZettle also take a while to credit your bank account - 7 banking days for most simple purchases.

iZettle is not Chip and Pin either, this may put off some of the security aware people. That said, the technology is secure and the fraud rate for Chip and Signature is a lot lower than Chip n Pin.

So what's the catch?

Well, apart from the down side, none really. iZettle make money from the fee they charge and keeping your money in their bank account a few extra days.

This isn't a mature business solution yet, but it is good enough for a photographer or model to collect a days fees.

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