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Tech allowing small businesses to swipe plastic on the cheap

By Stephanie Grimes | Posted - Nov 27th, 2012 @ 8:36am

SARATOGA SPRINGS — Small businesses may have been among the hardest hit during the recession, but ever-changing technology is giving some small business owners a leg up in a still-struggling economy, and is making things easier for consumers, as well.

Most people take for granted point-of-sale systems — the systems that allow purchases to be made — as just a part of the shopping experience. Most go to the store, swipe their card and are on their way. On the other end of that transaction, though, is a business owner who cannot afford not to think about the system.

Kristie Patten decided against accepting credit and debit cards when starting her hair salon, Real Beauty, because the setup costs were too expensive. The Saratoga Springs resident has been doing hair for 20 years, so her clients have gotten used to paying her with a check.

"The startup costs were prohibitive," she said. "Plus, they charge annual fees and take a higher percentage off of each transaction."

A POS system can cost anywhere between $1,000 and $6,500 to install, depending on the programming and customization a business owner is interested in. On top of the cost of a system is a transaction rate charged by banks and credit card companies per card swipe — usually between 2.5 and 5.5 percent.


For a person starting a small business that will likely not turn a profit within its first year, those costs can be overwhelming. And even for established small businesses, high transaction fees could be the difference between ending the month in the red or the black.

That is where technology is beginning to play a role. Improvements to tablet computers, the ubiquity of Wi-Fi and the release of tools such as Square or Isis are revolutionizing the way small-business owners work.

Patten said she has only been using a mobile payment system for a few months, but thinks the change will be a positive one for Real Beauty.

"I'm really scared of technology," she said, laughing at herself. "I haven't used this a ton because people are used to writing me checks, but I love it. Love it."

She said there is a fee for each transaction — about 2 percent — but it is worth it, to her, to not have to go to the bank every day. And she expects to see an uptick in clients now that she accepts credit cards.

"I was going to the bank twice a day sometimes because I hate holding on to people's checks," she said. "So it's worth it, to me. Plus, a lot of people use their credit cards to get their hair done — I don't, but many people like to get their hair done as soon as they think of it — so I think this will make a difference. I'm not limited to people paying with cash or checks."

Willingness to make mobile payments via Square, Isis or another system increases with income but decreases with age, according to a MasterCard study. (Photo: MasterCard)

Many business owners do not want to simply "go without" those customers; often, potential customers are more likely to just walk away if credit cards are not accepted than they are to hunt down an ATM. Now, smartphones and tablets mean anyone can find the right equipment for a fraction of the price.

"There aren't any annual fees or hidden costs, so I know exactly what I'm paying for — the transaction fee," Patten said. "I'm so small, I just want to pay that."

Patten uses Square on her smartphone, and many business owners are opting to turn their tablets into mobile payment systems. It isn't too great a stretch of the imagination to think that this could become the norm at mom-and-pop shops or specialty boutiques, as half of Americans now own either a smartphone, a tablet or both, allowing them to begin accepting cards as payment without paying traditional setup costs.

The stylist said she only wishes she had done her research before deciding which company to go with — some companies offer same day deposit, which would have been a good feature. But it's not a dealbreaker.

"For me, this is just so worth it," she said. "It's cheap, simple. It saves me time and my customers are very excited about it. They love the idea."

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