Mobile devices offer an increasingly popular way for small businesses to accept credit card payments, with Square reporting that its adoption rate is accelerating and that its user base now totals more than 2 million.  

Square also reported that it is processing over $6 billion in annual payments. In its first year of availability, Square signed up 1 million users and that number doubled in the past six months.

“Square has made it extraordinarily easy for small businesses to adopt that payment structure,” said Marci Troutman, CEO of SiteMinis, Atlanta. “There is also a consistent payment structure and it provides small businesses an additional way collect revenue.

“Square also has a full-blown marketing effort behind it to create awareness of that opportunity,” she said. “If you are a small business, you can get a device and you are in business to collect credit cards.”

Ms. Troutman is not affiliated with Square and spoke based on her experience in mobile.

Growing competition
Square enables art dealers, musicians, retailers and other small businesses to process credit card transactions via a smartphone by attaching the Square Card Reader hardware to the device. Payments are processed through the Square Card Reader and Square Register apps.

Besides the ease and convenience of being able to process credit cards with a smartphone, Square also charges merchants only 2.75 percent per transaction, which is lower than what traditional merchant payment services firms typically charge.

The significant growth in the mobile credit card processing segment, which Square helped develop, is attracting other players. 

The Square Card Reader iPhone app.

PayPal recently introduced PayPal Here, a similar merchant solution for processing credit and debit card transactions via a mobile attachment (see story).

While PayPal is a latecomer to the space, it brings significant advantages in that it has preexisting relationships with a large number of retailers and is pushing into the merchant space with a number of initiatives.

Intuit, which also operates in the space, recently acquired shopping application AisleBuyer to extend its merchant offerings (see story).

Another player in this space is VeriFone, which recently said that it expects to process over $10 billion in mobile payment transactions this year.

Merchant offerings
Square is addressing the growing competition in a variety of ways, including with a significant expansion of its distribution points with its products now available in 20,000 stores, including Walgreens, FedEx Offices and Staples locations (see story).

Similar to PayPal’s and Intuit’s effort to expand their merchant offerings, Square also recently revamped its application that lets shoppers complete transactions via their smartphones. The Card Case app has been rebranded Pay with Square and now includes new features to make it easier for users to find nearby merchants who accept mobile payments via Square (see story).

Square has an opportunity for significant further growth based on how difficult it can be for small businesses to sign up for credit card transactions through the traditional merchant processing services providers.

“In the small business world, the growth potential is exponential,” Ms. Troutman said.

“If you are a small business, it is somewhat difficult to get into First Data whereas this really gives an easy integration point for small businesses to accept credit cards for purchases,” she said.

“I think it has a very wide berth of opportunity since it works for an entire element of small businesses that may not even have bricks-and-mortar facilities, everything from a hot dog stand to a food tent at a music festival.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York