The Time Is Now for Mobile Payments

NEW YORK (TheStreet) -- The time has come for business owners to accept that mobile payment systems are gaining in acceptance and that if you're not already on board your business is in danger of being left behind.

Wednesday's announcement that Starbucks is partnering with Square to provide mobile payment options within its 7,000 U.S. stores and investing $25 million in the company was a major market vote of confidence in the mobile payments provider and for the movement in general.

Up until now, Square had pitched its mobile payment system primarily to small merchants, but the Starbucks announcement means the company and the concept have arrived, says Stephen Burke, vice president of mobile at Resource Interactive.

"Square works. Its transaction costs are lower, it's secure and it's just going to get better as they raise additional capital and begin to build out founder Jack Dorsey's vision," Burke explains, adding, "This is the next inevitable step in the mass consumerization of mobile payments."

It's also fair to say that before the Starbucks backing of Square, the mobile movement had been talked about more than it had actually been embraced.

The partnership will also "accelerate the ability of small businesses to grow with Square's innovative technology and a stronger and more widely available Square network," the companies said in a release.

For Starbucks, the move is a logical one. Burke points to consumers' morning coffee fix as a perfect example of where the proliferation of mobile payments seems to be flourishing: daily repeated, small, secure transactions.

>>>Small Businesses Assess Mobile Payments

"This is kind of drip, drip, drip exposing the American consumer in a very utilitarian, effective way. It will have an impact on small business," Burke says.

Even if a small business isn't 100% convinced of mobile payments, it can't hurt to experiment.

"Square is mature enough and reliable enough and secure enough" for retailers and service providers, Burke says. "Starbucks is going to stretch the system. That will ultimately benefit small businesses because they have a big corporation doing the heavy lifting for them."

The partnership with Square will also have benefits for other local merchants that are simply located near a Starbucks, given that the application has a GPS location device.

"Square is going to message consumers with other opportunities, offers, coupons, what have you, for relevant small businesses or stores that are in that proximity," says Daryl Colwell, vice president of business development at MediaWhiz, an integrated digital media agency.

Other mobile players

Square isn't the only mobile services provider aiming to take a bigger piece of the growing mobile payment space. From MasterCard and Visa to eBay's PayPal and Intuit's GoPayment, lots of companies are positioning themselves for the "inevitable."

Small businesses may find Square's option cheaper than using Visa, MasterCard, Discover or American Express, which have more complex pricing structures. A merchant will pay a flat 2.75% if they use Square's app or hardware to swipe a card. (Of course the fee is more if the transaction is keyed in.)

"Square is a lot cheaper for small merchants on small-ticket items, particularly after Visa and MasterCard raised their debit processing fees on small businesses," says Anisha Sekar, vice president of credit and debit products at NerdWallet, a credit card comparison website.

This doesn't imply small businesses should blindly jump into the mobile payments arena. Most importantly, decide if integrating mobile payments is right for the business and its customers.

"Before you jump into any of this, see how you're customers would like to pay," says Peter Shankman, social media strategist, adding, "They need to do what works for them and their customers."

For instance, similar to the payment concept being used by Apple in its retail stores, instead of having 20 people waiting in line to pay, have salespeople walk around using a mobile device to quicken the payment process.

NerdWallet's Sekar tells businesses to proceed with caution.

"I wouldn't recommend that a small business rush to get Square simply because of Starbucks," she says. "Mobile payments have yet to catch on among older consumers and many remain leery of security concerns. Moreover, this is a relatively new technology, and small businesses that don't have the time or resources to follow developments closely may find themselves whipsawed."

-- Written by Laurie Kulikowski in New York.

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