Credit card technology for micro-businesses

One of the discrepancies of credit cards has been that many of the smallest businesses, particularly face to face businesses, are not able to use credit cards because of the large investment in machinery that is needed which means that a certain minimum investment is required.

This puts small businesses at a disadvantage.  Small businesses are not only less likely to benefit from consumers who have little money in the bank account and so are using credit card balances for everyday spending, but they also have poor access to a greater number of consumers who use credit or debit cards for most of their everyday transactions instead of carrying a large amount of cash around.  There are also bits of customer behaviour that are more likely with credit cards, such as making large purchases in order to take advantage of an advertised discount, which the small business owner cannot see any benefit from.

Many companies with a web presence now accept credit cards through the use of simplified payment systems such as PayPal.  PayPal allows credit card fees to be accepted, although it tends to cost more than simply accepting the payment through a PayPal account.  However this option means that those businesses that sell their products over the internet do now have a low cost way of accepting credit cards.  However there are many consumers who do not like internet transactions due to perceived security risks of giving out personal details over the internet.
This still means that credit cards cannot be used by some of the smallest businesses which have face to face dealings with customers.  These include businesses such as hairdressers, market stalls and taxi drivers.  Changes in smart phone promise that credit cards will soon be able to be used by this type of businesses.

The market leader in creating these devices is a company called Square, which was founded by one of the founders of Twitter.  This device is planned to be used in conjunction with smart phones, such as the Apple i-Phone.  It uses the audio jack which is standard on most high end phones.  This device can be used to read the card, and smart phones have the processing power to run some validation software on the phone itself as well as communicating with the credit card provider.

There are still costs for the small business.  For example the merchant fees that credit card providers charge for processing the card are still as large as they always have been.  For businesses with tight margins they may still be uneconomic.  There is also the fact that many business owners will be required to upgrade their mobile phone to take advantage of this technology.