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What Does Apple Pay Mean for Small-Business Owners?

Oct. 9, 2014
Small Business
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McDonald’s, Walgreens, Whole Foods and Macy’s are among the large corporations that will start accepting Apple Pay in their stores when it’s released this month. But Apple’s big-name partnerships leave some small business owners wondering if they can get in on the mobile payment service, too.

“I think that at some point, every company… needs to look at that combination of cost, ease of use, getting their money, and customer service,” says Mike Olafsson, owner of Monkey Fish Toys, a toy retailer with stores in Exton and West Chester, Pennsylvania.

For some small business owners, that means finding a way to accept Apple Pay, which likely will mean investing in new equipment.

The Apple Pay payment system uses near field communication (NFC) and lets consumers pay by selecting a card on their iPhone 6 or 6 Plus and hovering it over an NFC reader. The customer can then verify that payment with a fingerprint. With a Europay, MasterCard and Visa (EMV) chip and tokenization, which ensures the customer’s number isn’t shared with merchants, the system also provides more robust security than some swiped credit card transactions.

Fewer than 10% of merchants currently use NFC readers, according to Mark Hung, an analyst at technology research firm Gartner, the Wall Street Journal reports. But that could quickly change as merchants rush to update their technology before the rules about liability for fraudulent purchases change in October 2015.

Known as the global point-of-sale counterfeit liability shift, the new rules state that if a fraudulent transaction occurs, the party who didn’t take precautions — that is, the customer who didn’t have an EMV chip in his or her card or the merchant without an EMV chip reader — will have to pick up the tab for wrongful charges. Businesses that don’t update their card readers could end up paying out-of-pocket if fraud were to occur at their stores.

Chances are, if you’re updating your business’s card reader to be able to detect EMV chips, you’ll automatically get an NFC reader as well. Many providers, including First Data, which serves over 6 million merchants worldwide, are now bundling these products together.

Depending on how many features you want, buying an NFC reader that also processes personal identification number transactions and reads EMV chips would be a one-time cost of “couple hundred dollars,” says First Data’s global leader of e-commerce, Bruce Dragt. For more comprehensive systems that provide access to apps, cloud software and other services, there may be additional, ongoing charges. Those systems could cost “several hundreds of dollars,” Dragt says.

If you want to get an NFC reader for your small business, call your service provider for your point-of-sale system and ask about what hardware and software you would need to purchase. Dragt notes that most First Data customers find the technology easy to use.

“The installation process really is taking … a USB cord and plugging it into a USB port and updating the software,” he says. Customers who encounter complications can call help lines, seek support online or have representatives assist them in person.

If your provider doesn’t offer NFC readers yet, don’t panic – more are on the way. Square, a mobile payment startup popular with small business owners, has expressed excitement about the new technology.

“We think it’s great to see Apple offer customers another way to pay,” Square spokeswoman Catherine Ferdon writes in an email. “And, as customers have more ways to pay for things, we’ll remain committed to enabling our sellers to be able to accept how their customers want to pay.” She adds that Square, which is currently updating its card readers to recognize EMV chips, is also working on a “contactless solution” for its customers, though details have not been made public.

While many small business owners are excited about the new technology, some, like Olafsson, are waiting to see how many people use Apple Pay before making the investment. He’s used Square’s payment processing services for about two years and appreciates its simplicity.

“I’m an Apple fan,” Olafsson says. “Will I try it? Likely. Am I going to jump into it as a huge adopter? I want to definitely see how it plays out.”

Apple Pay photo  via Bloomua /