Mobile Credit Card Processing Options Compared: The Smart Phone Solutions from Square vs Intuit GoPayment vs PhoneSwipe

PhoneSwipe by North American Bancard is the most flexible and potentially cost-effective mobile solution for active merchants. Square offers the most simplified terms for low-volume merchants who are in no hurry to get their money and may best suit the interests of individuals who process less than $1,000 per week. GoPayments is a solution to consider if a merchant is tied in to other Intuit products (such as QuickBooks), though it offers no compelling advantages over the competition.

NOTE: Updates appear at the end of the article.

First, a disclaimer: I utilize and one of the services that I am comparing here for my own clients, and thus there is a presumed bias on my part to favor it. To that end, I will acknowledge that the reason I provide that particular service is that I find it to be a superior solution much of the time. However, it is not the perfect solution for every merchant and I want to clearly and transparently state that I endorse a competitive product for the appropriate circumstances. My hope is that by reading this article, a prospective merchant will be able to determine quickly and easily which product and service is appropriate for his or her business. I will offer links to both the service I represent and the competition, along with links to pricing information and other reviews.


That said, when NAB began offering card processing solutions that could work on an iPhone or the Android platform, I was very interested in discovering how it compared to the existing mobile apps that were on the market. Specifically, I was interested in how it would stack up against Intuit’s GoPayment system (the solution offered by the biggest processing company to roll out their own software at that point) and the cleverly designed and marketed Square product. Square was something I was coming across a lot in the field and I had been quite impressed by. In fact, I was debating setting up an account of my own with Square, just to have as an alternative to PayPal if I needed it. When I received the first informational brochure on PhoneSwipe, it appeared that it had a lot in common with Square and GoPayments, if not Square’s stylish cube design card reader.


The reality is that there are some distinct similarities between the products and some important differences. However, there are good reasons for choosing each product, depending upon the actual intended use, style of business and need for flexibility. For the individual who only wants to have it handy for the outside chance a credit card may need to be used to accept payment for something once or twice a year, it almost does not matter which service is used. For the business owner looking to use this as a primary means of accepting cards, however, it is important to examine the options carefully.

The first issue that comes up is usually price. In that regard, PhoneSwipe appears to be the obvious winner. I stress “appears” in that under specific circumstances, Square will be less expensive, but only if this is generally the case: all sales are less than $10 AND there is under $2,000 of total revenue in a month. There, I’ve said it—if you sell coffee from a cart at the Farmer’s Market on Sundays, Square might be the solution you are looking for. It’s a generalization, of course, but simple math shows that the lower occurrence of transaction fees with Square indicates that it may be a better deal for purchases below $20, provided that those purchases are DEFINITELY swiped at the Qualified Rate.


It gets more complicated after that, which is why merchants may want to consider one of the other options, even if they are less glamourous looking.

http://gopayment.com/faq/#
https://squareup.com/pricing
http://www.bancardsetup.com/landing/Solutions/Mobile?source=16732.1

Before going further, I am going to break down the pricing options for each platform.

Square is the simplest breakdown because they essentially only have one “flavor” of service. Because it is the most basic of the three major mobile processing solutions, it is not surprising that it is also the most expensive. Any time there is a “cookie-cutter” or “one size fits all” option, it will necessarily be established so that everyone pays the higher rates. Square is also not an established merchant services company, and therefore cannot offer the same level of service and protection that a dedicated company can. While there is no question that Square is an innovative company, they are also trying to reinvent the market in order to gain a greater share while also locking merchants into their service for the long run (thereby limiting future choice) through their new features.


The bottom line with Square is that swiped cards are charged 2.75% and keyed charges are at the rate of 3.5% plus a fifteen cent processing fee. Transactions take an estimated three to four days to be deposited [“Square automatically initiates deposits within 36 hours of each transaction. Once a deposit is initiated, it may take a few business days (the speed largely depends on your bank and remember, weekends don't count!) to register in your bank account.” https://help.squareup.com/customer/portal/articles/11866-where-does-my-money-go-and-how-long-does-it-take- ]. Additionally, Square has a policy of holding any amount over $1,000 per week for a 30 day period, during which Square is profiting from any interest rather than the merchant. Because Square is covering their own liability in this respect, it is not surprising that they have the slowest payment period and the lowest range of available funds. Technical support is also apparently only available via email or Twitter, so it may not be a viable option for businesses that need to keep moving quickly, even when the service is down (dropped phone, anyone?).

On the other hand, if a merchant’s volume is very low and their charges are consistently under $20, it is a remarkably easy service to set up and use. Square also offers iPad users (and only iPad users) the option to add a limited catalogue to the application which can make handling some transactions easier.

Intuit, the same company that provides Quicken and Turbo Tax, is also a merchant services provider that has in-house card processing software available for a PC-based POS system that they provide. If a merchant is locked into one of these services or software brands, GoPayments may be a reasonable solution to consider. GoPayments supports a wider range of devices than Square and offers a comparable rate plan. With GoPayments, regular Qualified Rate swiped charges will get a rate of 2.7% and manually entered charges have a rate of 3.7%. Downgraded charges will also be charged the keyed rate of 3.7%. This is very important to understand because many types of cards are automatically downgraded. (See my article on Interchange fees to learn more about the different card types.) This includes all Rewards Cards, Mileage Cards, Corporate Cards, Foreign Cards and just about any other card associated with a special program. The only cards swiped strictly at the Qualified rate are simple bank-issued cards with no bells and whistles. The same designations go for debit / check cards used for signature based transactions. As for availability of the funds, Intuit states that “money from your transaction is generally deposited into your bank within two to three days of the transaction.”

Intuit also offers a “merchant account” option for established businesses that do higher volume. https://merchant.intuit.com/signup/start.wsp;jsessionid=B4F7BE4F84320AF54038845FE2F1D2B9.merchant_imsap01

The terms of this style account differ because there is a much lower rate in exchange for a monthly fee. The terms are good, too, compared to Square. For a $12.95 monthly cost, the swiped Qualified rate lowers to 1.7% with manually entered Qualified cards charged at 2.7%, which is already lower than Square’s base charge. However, downgraded cards at the Mid- or Non-Qualified rates are charged 3.7% plus a seven cent transaction fee, which is hidden in the fine print tucked below the rate sheet. There is also an additional 0.3% “Card Not Present” fee tacked on for transactions taken over the phone, Internet, or fax. The upside to this service is that a merchant will have better customer support, more flexible options for processing transactions in instances of equipment failure and potential savings over the standard non-contract rates if the merchant does a high volume of Qualified rate charges.

North American Bancard’s PhoneSwipe software works on a wide variety of smart phones and tablets, much like GoPayments, and also has two versions of payment options. The rates for the contract-free service are the 2.69% for Qualified rate charges of credit and check/debit cards, and 3.49% for downgraded or manually entered cards. There is also a nineteen cent transaction fee on charges. It is only because of this nineteen cent transaction fee that Square would be a better deal for merchants consistently taking charges under $20. Once average tickets are in the hundreds of dollars, Square is no longer offering any advantage whatsoever. An additional bonus for PhoneSwipe is that all transactions are batched immediately, which translates to the quickest deposits out of these compared services. All transactions should be in a merchant’s bank account within 48 hours (plus any non-bank days, just like the other services).

Where PhoneSwipe becomes the most interesting, however, is with the more flexible merchant contracts. This is one of the main reasons that I provide this program to my own clients: unlike the simplified plans available with the other services, PhoneSwipe can be customized in several ways just like any other merchant services plan from a major processor. These terms can use standard retail rates beginning as low as 1.59%—or even 1.19% if check/debit cards are provided at a lower rate. NAB can provide these lower rates partly because they are a “wholesale” service provider and cover their own liability rather than merely reselling access to a processing network. (Both Square and PhoneSwipe process over the same “Global Payments Network,” for example.) Because this is a certifiable merchant account, there are associated monthly fees that range approximately $20. Because this is slightly higher than GoPayments, it should be noted that there are also transaction fees (albeit lower under this plan, closer to fifteen cents) on PhoneSwipe transactions. So why choose PhoneSwipe if it has higher monthly fees AND transaction fees on each charge? The answer is simple: for most merchants, it will end up being less expensive and they will get their money faster. This means, saving time, saving money—and NAB offers the additional protection of live support from an established and reputable merchant services company. (As an aside, because PhoneSwipe is customized to the merchant when setting up this type of account, it is important to establish a relationship with a representative who is capable of understanding the business needing the service as well as providing a thorough understanding of the processing agreement. Always read agreements and ask questions.)

Another very important distinction with PhoneSwipe’s fee schedule is that it can also be set up as an “Interchange Plus” account. For some merchants, this is a way to increase their savings even further, depending upon the type of business and the cards typically used by their customers.

The PhoneSwipe software is also more robust. It allows for generating reports, cataloguing, including photographs on emailed receipts (of either the customer or the sale items) and many more productivity features normally only found in a full-scale POS system. This alone may make the option more appealing to merchants with needs for inventory control. Integration with Google Maps, geo-tax options and even tip lines complete a best-in-class feature set. (The other services do allow for tips, although the rest of the features do not appear as flexible or complete.)

When weighing the cost of a dedicated POS system, PhoneSwipe becomes a tremendous bargain, and the same account can be shared among multiple devices.

At the end of the day, there are good reasons to use each of these services, but a merchant’s specific needs will dictate which service suites the business best. Often times a consultation with a legitimate merchant services professional can help a merchant determine the most appropriate and cost effective solution. Even then, there is no substitute for personal education and a comprehensive understanding of the products on the market.

Although PhoneSwipe is a very terrific and versatile application designed to work across platforms, there are still a few devices on the market that are not fully functional for various reasons.

Unlike Apple, which has tight control over both hardware and software design to ensure that all of their products function the way they are supposed to (which is why the iPhone, iPad and the iPod Touch are preferred devices for using as processing solutions), there are a number of Android based phones that have limited functionality or simply cannot run the PhoneSwipe software.

Because the card reader requires three-channel audio in the headphone jack to get power and operate, several new Android phones that only have two-channel audio jacks will not work with the card reader. The software still functions fine and can process manually entered card numbers at the higher rate or merchants can use them as Mail Order / Phone Order account processing solutions where no card would be present anyway.

These phones include:

Droid 2 Global and Droid X2 from Verizon;

Evo 3D and Transform from Sprint;

HTC Inspire and Motorola Atrix from AT&T.

Additionally, the hardware on the following list of phones renders the software completely unusable because it will either not load properly or buttons do not respond within the app:

HTC MyTouch 4G and Samsung Dart on T-mobile (please note, the My Touch 3G does work);

Samsung Replenish on Sprint;

Motorola Citrus on Verizon;

Huawei Dts on Metro PCS.

If you have one of these phones, the software will not function according to the latest tests.

If you have questions about your device, feel free to ask them here. I have a list of approximately 40 phones and tablets that have been tested to work perfectly fine.

It may be of interest to merchants that PhoneSwipe has rolled out new compatibility options that include printing of receipts or reports, as well as cash drawer compatibility. Obviously a printer or cash drawer would need to be purchased separately.

An additional point that is going to be very important for small ticket merchants is that for "Pay-As-You-Go" accounts, PhoneSwipe now does NOT charge a transaction fee on qualified transactions. This means that even for the small coffee vendor, PhoneSwipe is potentially a better deal with the Pay-As-You-Go plan. For this type of merchant, however, it is essential that they work with an agent who can set their account to include rewards cards in the qualified category because rewards cards are typically downgraded by default.