Guide to Payment Systems – Small business information, insight and resources | Thu, 15 Nov 2018 17:41:39 +0000 en-US hourly 1 Square Unveils Terminal, an ‘All in One’ Portable Point of Sale Device Thu, 18 Oct 2018 20:06:55 +0000

Square Inc., a pioneer in the mobile payment processing category with its point-of-sale credit card readers and plug-in smartphone peripherals, today unveiled (10.18.2018) a new device intended to replace its legacy hardware device. The Square Terminal is described as an “all-in-one” mobile device that will replace keypad credit card processing devices. In addition to accepting credit cards, Terminal will also process mobile payments through Apple Pay, Google Pay, Samsung Pay, and NFC.

An expanded Square ecosystem

The new mobile product was designed by an in-house hardware team to be wifi enabled and have an all-day battery life. According to the company, these features will enable sellers like restaurant waiters, salon stylists or shop owners to check-out customers anywhere throughout the business . Owners can also charge customers by manually inputting a payment amount, or by selecting from an inventory displayed on the screen. Sellers can add items and track sales through Square software, which they can set up on their phones or desktops.

Costs & Fees

2.6% | Transaction fee
+10¢ | Additional fee per payment

$399 | Price of the device
-$300 | Incentive credit for sellers that switch to Square

Images via Square Inc.

PayPal to Acquire Small Business Lender Swift Financial | 2017 Mon, 14 Aug 2017 19:02:57 +0000

Here’s a follow-up to news earlier this month regarding additional funding for the small business lending company Kabbage. Now, PayPal has announced plans to acquire Swift Financial which, like Kabbage, is a marketplace lender that provides small businesses with secured lines of credit.

PayPal is not new to the small business loan marketplace. In 2013, the company launched PayPal Working Capital. According to PayPal, it has provided access to more than $3 billion in funding to more than 115,000 small businesses since it launched PayPal Working Capital.

In its announcement, PayPal said the acquisition will add to PayPal’s underwriting capabilities and expand the amount of data it can use to assess the creditworthiness of its customers. Swift said the acquisition will help “democratize financial services by enabling PayPal to further fill the small business funding gap.”

“We know and value Swift’s technology platform and people, and we believe their talent and capabilities will further strengthen our overall merchant value proposition,” PayPal’s Darrell Esch wrote in announcing the deal. “Building upon an existing commercial relationship, the acquisition of Swift Financial will enable us to better serve small businesses by enhancing our underwriting capabilities to provide access to affordable business financing solutions to more businesses to help them grow and thrive.”

According to its announcement, since being founded in 2006, Swift Financial has provided funding to more than 20,000 small businesses.

VIA | Techcrunch

An Overview of New Options for Point-of-Sale and Peer-to-Peer Payments | 2017 Mon, 26 Jun 2017 12:06:42 +0000

“I’m sorry. We don’t accept cash.” Recently, while paying for an order at a new independent coffee shop near the offices of, I heard that phrase for the first time (other than during a Southwest Airlines flight). Granted, this shop was located in a neighborhood with a high density of millennials, hipsters and coffee lovers (my demographic). It’s also in a neighborhood where you’ll find lots of young merchants with little resistance to trying out new technology. That’s a good thing, as the options for payment choices are about to change even more dramatically than they have in the past five years — back when you could buy a cup of coffee with cash.

If you are a small business owner who runs a retail store, restaurant or any type of business that involves some type of point of sale or person-to-person payment, get ready for a new generation of cash alternatives. Here’s a roundup of some of the recent developments that big banks, big technology companies, and big digital brands will soon be wanting small businesses to adapt.

Major banks cooperate to create Zelle, a mobile digital payments network

After six years of “laying a foundation,” more than 30 major banks* are introducing Zelle (pronounced “zell”), a digital payments network that will allow people to send money instantly through participating banks’ mobile apps.

Quote (

“The casual payments that people make every day — $20 for the dog walker or $50 to split a dinner check with friends — have long been one of the American banking system’s thorniest problems. Instant person-to-person payments are common in many countries, but in the United States, sending cash between banks is often a technical ordeal. Zelle’s pitch is that it will be fast, free and ubiquitous. The interface is almost identical at each participating bank, and setting it up takes only a few seconds. To send money to others, you need only their phone number or email address. If their bank is part of Zelle’s network, recipients can immediately sweep the cash into their own checking account.”

Venmo & Square have one word for you: Plastics

Paypal’s Venmo, the early winner in person-to-person app-enabled payments, and the point-of-sale payments company, Square, are both entering the plastic, pre-paid, debit card arena. The Venmo card will allow people who use its app to make purchases in brick-and-mortar stores using money stored in their Venmo account. Up to now, Venmo has been an app that people use to transfer money to other Venmo users, including businesses that accept it. In May, Square, best known for its point-of-sale and smartphone swipe devices, announced the launch of a similar debit card (like the all black one above).

Apple Pay ‘Cash’ will let customers make transactions via text

At its major developer’s conference last month, Apple unveiled a new peer-to-peer payments service that will be included as part of its next-generation iOS, Apple’s operating system for the iPhone and iPad. Like others in the peer-to-peer payments arena, the feature will let users send money to family or friends or merchants accepting Apple Pay — or even transfer money to a bank account. Its unique feature: such transactions and payments can be carried out through Apple’s text messaging app, iMessage.

*Participating banks (alphabetically): Ally Bank, Bank of America, Bank of Hawaii, Bank of the West, BB&T, BECU, Capital One, Citi, Citizens Bank, Comerica Bank, ConnectOne Bank, Dollar Bank, Fifth Third Bank, FirstBank, First Tech Federal Credit Union, First Tennessee Bank, First National Bank, Frederick County Bank, Frost Bank, HomeStreet Bank, JP Morgan Chase, KeyBank, M&T Bank, MB Financial Bank, Morgan Stanley, PNC Bank, SchoolsFirst Federal Credit Union, Star One Credit Union, SunTrust Bank, TD Bank, USAA, U.S. Bank, and Wells Fargo.

Regulations Issued for U.S. Pre-paid Credit Cards and Related Apps | 2016 Thu, 06 Oct 2016 12:27:41 +0000

Yesterday (September 5, 2016), the U.S. Consumer Finance Protection Bureau (CFPB) put into motion the process of issuing final rules and regulations related to pre-paid credit cards and new forms of digital payments, including transactional apps like Paypal’s Venmo and Google Wallet. The new rules will generally apply to prepaid accounts starting Oct. 1, 2017, though the requirement for submitting agreements to the (CFPB) takes effect in October 2018.

The use of prepaid cards has exploded over the last decade
Amount consumers put on pre-paid money cards annually

$1 billion | 2003
$65 billion | 2012
$121 billion | 2018 (projection)

In the U.S., the cards and their smartphone app equivalents are facilitating the long-envisioned cashless society. Pre-paid cards are used today for:

  • Person-to-person payment platforms (i.e., Venmo)
  • Payroll cards
  • Student financial aid disbursement cards
  • Tax refund cards
  • Government benefit cards (i.e., unemployment insurance and child support)

Because the role of prepaid credit cards and transaction smartphone apps is rapidly becoming as ubiquitous as other forms of money cards (credit, debit, etc.), the CFPB’s new rules stem from the Electronic Fund Transfer Act. “Our new rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone. And it backs up those protections with important new disclosures to let consumers know before they owe.” CFPB director Richard Cordray said.

Industry support

According to, most of the industry players in pre-paid card products are  supportive of clear rules as a legitimizing force in their industry. According to the CFPB’s report, these protections are derived from Truth in Lending Act and the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) and will in some sense treat prepaid cards much like credit cards.

Industry opposition

Also according to, the new rules — despite both Google and PayPal’s objections — cover “digital wallets capable of person-to-person transfers and storing funds.” Analysts also suspect that Square Inc.’s Square Cash and Dwolla’s payment tool will also fall under the new rules. (Wallets like Apple Pay — which simply store payment credentials issued by banks — will not fall under the new rule.)

What the new regulations cover

The new rule gives prepaid account consumers  protections under the Electronic Fund Transfer Act, which are similar to those for checking account consumers. They include:

  • Free and easy access to account information: Financial institutions must make certain account information available for free by telephone, online, and in writing upon request, unless they provide periodic statements. Unlike checking account customers, prepaid consumers typically do not receive periodic statements by mail. The rule ensures that consumers have access to their account balances, their transaction history, and the fees they’ve been charged.
  • Error resolution rights: Financial institutions must cooperate with consumers who find unauthorized or fraudulent charges, or other errors, on their accounts to investigate and resolve these incidents in a timely way, and where appropriate, restore missing funds. If the financial institution cannot do so within a certain period of time, it will generally be required to provisionally credit the disputed amount to the consumer while it finishes its investigation.
  • Protections for lost cards and unauthorized transactions: The new rule protects consumers against withdrawals, purchases, or other unauthorized transactions if their prepaid cards are lost or stolen. The rule limits consumers’ liability for unauthorized charges and creates a timely way for them to get their money back. As long as the consumer promptly notifies their financial institution, the consumer’s responsibility for unauthorized charges will be limited to $50.

VIA | | (Final Rule PDF)


Charge! Square Releases its Chip Card, Wireless Payment Reader Wed, 25 Nov 2015 16:55:50 +0000

On Monday (11/23/2015), the point-of-sale payments company Square announced it had started sending out its new credit card reader that accepts chip cards and wireless payments.

In June 2015, we covered Square’s unveiling of the new device. We also pointed to the tweet below announcing that 250,000 of them would be distributed for free. However, in the company’s press release, no mention of the “free” readers was made. We’re guessing that means the freebies were already taken.

Cities where the Square Readers are arriving

According to the company’s press release, the first 100 readers were already being used in these cities:

  • Atlanta
  • Austin
  • Boston
  • Denver
  • Los Angeles
  • Nashville
  • New Orleans
  • Miami
  • Minneapolis
  • Philadelphia
  • Phoenix
  • Sacramento
  • Santa Cruz
  • Seattle
  • Tampa
  • Washington, D.C.


How to order a Square Reader

To learn more about the reader and to order one for $49, you can visit


Reminder: Why you should have a chip card reader

On October 1, 2015, new regulations were activated (after years of being planned) that shift liability from banks to merchants (sellers) if the merchant does not use a chip card reader. You can read about it in an earlier article.


The Fastest Growing Markets for Small Business Ecommerce Aren’t the Ones You Are Guessing | 2015 Tue, 17 Nov 2015 13:07:37 +0000

We see (and share) many lists related to cities and their small businesses. Most focus on the biggest, best or some unique attribute related to the company that sponsored the research. However, this list from PayPal is somewhat unique because it is based on actual data, not an opinion survey or collection of factors that can influence the nuances of the research.

U.S. Cities With Fastest Year-Over-Year Growth in Small Business Ecommerce

  1. Fargo-Valley City, North Dakota
  2. Lafayette, Indiana
  3. Odessa-Midland, Texas
  4. Traverse City-Cadillac, Michigan
  5. Jackson, Mississippi
  6. Watertown, New York
  7. Beaumont-Port Arthur, Texas
  8. Casper-Riverton, Wyoming
  9. Charlottesville, Virginia
  10. North Platte, Nebraska


Okay. We’ll admit it’s a bit challenging to understand exactly what this top ten list actually measures. According to PayPal, these are the “fastest growing small business markets determined by Year over Year (YoY) Total Payment Volume (TPV) as of May 2015.” A consideration to take (translation: we’re guessing), the payment volume also could have a tight correlation to the cities where PayPal has been most successful in getting small businesses to add the PayPal button as a payment option.

However, even if the volume is a measurement of PayPal’s ability to get a bigger piece of the payments pie, it’s still an indication of something significant and counter-intuitive to most.

The cities on this list are primarily in America’s Heartland.

This list includes some city names that may be unfamiliar to people who live in urban centers near large bodies of water. For some of these cities, this could be the first time they’ve ever made it onto a list that includes a reference to technology. In other words, this is a list that reveals there’s something significant happening outside the locations where VCs live and recent engineering grads flock.

This list reveals that ecommerce, while still used by only a fraction of small businesses, could be seeing its biggest growth in markets outside the coastal early-adopting meccas. It would make sense that the fastest rates of growth can be found in places with the lowest basis on which to begin. (If there were five small businesses using ecommerce in Fargo last year and 50 this year, the growth rate would be out the roof.)

Others cities with small businesses having fast rates of growth in  ecommerce volume

Lafayette, Louisiana; Sioux Falls (Mitchell), South Dakota; Juneau, Alaska; Bowling Green, Kentucky; Davenport-Rock Island-Moline, Illinois; Indianapolis; Bluefield-Beckley-Oak Hill, West Virginia; Jonesboro, Arkansas; Rapid City, South Dakota; and Eugene, Oregon.

PayPal Will Soon Allow its Popular Venmo App to Be Accepted by Merchants | 2015 Mon, 02 Nov 2015 16:44:50 +0000

Venmo is a popular—especially among college students and 20-somethings—payment service that allows users to transfer money to another person using a mobile app. (Think, splitting a dinner tab or paying your roommate for your half of the monthly rent.)  Venmo charges no fee for such person-to-person financial exchanges, but has prohibited people from using it to purchase merchandise. According to PayPal, the owner of Venmo since 2013, that policy will change as soon as the payments giant begins allowing merchants to accept it as a form of payment anywhere that PayPal is already taken.

PayPal CEO Dan Schulman told analysts last week (10/27/2015) that PayPal will target merchants that already accept payments through PayPal and that Venmo will be “fully monetized by the end of next year.”

This won’t mean any fee changes for Venmo users—transferring money to friends will still be free (except for fees related to funds drawn from a credit card). Merchants will likely have to pay the same transaction fees they are charged for accepting PayPal transactions (2.9 percent of the transaction price, plus an extra 30 cents).

According to Schulman, Venmo processed $2.1 billion payment volume in the most recent quarter, up from $1.6 billion in the previous quarter. A year ago it was doing less than a billion in transactions. The company says this growth makes Venmo “one of the fastest growing apps in the world by dollar volume.”

(via: VentureBeat)

How the New Square Reader is More Than Just a Way to Accept Apple Pay Tue, 09 Jun 2015 10:00:03 +0000 Square’s new pocket-sized point-of-sale wireless reader was announced yesterday at Apple’s World Wide Developer’s Conference (WWDC). But the new Square reader is far more than a means to accept payments via Apple Pay. The reader will enable merchants to accept customer payments using these options:

Near Field Communications: Utilizing NFC technology, customers will be able to hold their iPhone, Apple Watch or other devices near the reader to pay via Apple Pay and other near-field communication (NFC) payment options.

Chip Cards: The new readers will accept “chip embedded” cards that use the EMV standard for a higher degree of security over traditional magnetic strip cards. (EMV stands for Europay, MasterCard and Visa, the companies that created the standard.)

Swipe: A traditional Square magstripe reader is included in the box containing a new reader. Both readers can be connected to a device (iPhone, iPad, Android) simultaneously, so a merchant can keep swiping conventional magnetic stripe cards as long as customers use them.

Square is joining other payment processing and ecommerce vendors that are rolling out various point-of-sale devices and approaches that support NFC and chip card payments, including Apple Pay.

new square reader 2

One advantage Square has, however, is that their new reader is designed to connect with its “Square Stands” that are already installed in tens of thousands of small businesses. And like its initial iconic square-shaped reader, the new wireless reader has a small, simple, sleek, minimalist look while enabling a full array of payment options. Another plus: The readers work with Square’s existing, free point-of-sale app.

Square’s promotional video announcing its new wireless reader.

Square is offering 250,000 of the new readers free to small retailers (one per retailer). The new reader is also available for pre-order in the U.S. for $49 (with a $49 card processing credit).


Square is Rounding Out its Small Business Services Strategy With Square Engagement Thu, 09 Apr 2015 13:41:07 +0000 In an effort to expand beyond the merchant processing services it offers small businesses, Square has now launched a suite of online marketing tools called Square Engagement that includes an email marketing service called Square Marketing.

Background: Square is the company that popularized the notion that a smartphone or tablet can become a credit card processor by simply plugging into it a little square piece of plastic. They are a well-funded venture-backed company started by one of the founders of Twitter. Currently, as we have shared, many other companies are now offering similar mobile device merchant account services, so Square has expanded its scope to include financial services that its small business customers might need. This strategy is designed to help the company expand past the razor-thin margins of payment processing and to leverage its large installed base of customers. Here is the way Square now presents the services it offers on its website :

services provided by square

While similar to other email marketing providers, Square’s service provides some unique twists. For example, like other email marketing services, it can track if a customer opens an email and clicks through to a link provided. Most services can even follow the journey of the customer to an online purchase. But Square is offering the ability to track the conversion of an offer in the email to offline, in-store purchases.

Also, because the service is tied to the small business’s payment system, collecting email addresses will already be attached to the service, providing Square customers a pre-populated email marketing list.

square engagement

Will Square’s strategy work?

Becoming a one-stop provider of various types of services that small businesses need to run their company has been a siren’s song since the earliest days of the web. While the integration of services makes sense on paper, the devil in the details is always execution. The users of Square’s services include a wide variety of small business owners with varying degrees of understanding on how to use services such as email marketing. Email marketing companies like Emma have become large providers of email marketing services because of their hands-on approach to customer service. And MailChimp has amassed a large user-base because of the variety of services it provides using a “freemium” model—a price with a lower profit margin than even merchant processing.

No doubt, the integration of payment processing and other financial and operational services will appeal to many Square users. However, a closed platform that ties email marketing to payment processing won’t make sense to those seeking more robust features developed over the past decade by companies like MailChimp and Emma.

U.S. Government Now Accepts Online Payments via PayPal, Dwolla Sat, 21 Feb 2015 03:00:14 +0000 Earlier this week, the U.S. Treasury announced that, the government’s web based collection portal for payments to federal agencies, will now accept both PayPal and Dwolla as payment options. According to the announcement, accepting payments via “digital wallets” is part of an ongoing effort to move away from paper-based processes to more efficient and secure electronic transactions.

“Digital wallets provide convenience, simplicity, and a trusted customer experience, while achieving cost effectiveness for the Federal Government,” said Corvelli McDaniel, the Treasury official heading up the government’s shift to electronic payments, a longterm project of the Treasury Department’s Bureau of the Fiscal Service. According to McDaniel, the goal of the partnerships with Dwolla and Paypal is to expand the options individuals have for transactions with the Federal Government, providing them with greater choice and a better user experience.

For example, small businesses or individuals who are required to submit a court filing fee at a U.S. Court, or anyone who wishes to make a donation to the National Endowment of the Arts, will have similar payment options currently available to them on popular private sector websites.

In Fiscal Year 2014, the Fiscal Service collected $3.73 trillion in revenue processing 400 million transactions through several programs, including Nearly 98 percent ($3.69 trillion) was settled electronically. The Fiscal Service’s objective is to provide a suite of electronic payment options to achieve the long term goal of moving to electronic transactions from less efficient paper-based transactions using services available in the private sector when possible.