• We conducted an informal survey of 24 small merchants — including bars, food trucks, and specialty grocers — in New York City to help us understand how small businesses are using mobile credit-card readers. Examples of these are the widely marketed PayPal Here and Square dongles, which plug into a tablet or smartphone and turn it into a register, and countertop stands that hold a tablet. Survey data indicates that these have gained wide adoption among small- and medium-size businesses. 
  • We were surprised to find that mobile credit card readers are not as widespread as the data suggests. Several surveys have shown that 40% of small- and medium-size businesses in the US use mobile card readers. But, among the two-dozen small merchants we surveyed, only five, or 23%, had tablet-based point-of-sale devices (POS). None of them used a smartphone. 
  • Worse, merchants who have mobile card readers don't actually use them. Of the five merchants who had a tablet as their primary point-of-sale/acceptance device, only two actually used them. One of them used a tablet integrated into a stand with a card reader, and the other used a dongle, or hardware attachment.
  • The merchants told us that the hardware wasn't rugged enough and the software was buggy. While inexpensive, solutions that use consumer-oriented smartphones and tablets (i.e., Apple and Android devices) end up leaving merchants frustrated because these devices are not rugged or designed for heavy use in retail environments and because the software is often "buggy."
    • Devices built for more rugged use and designed to last longer than the consumer devices on the market now are much likelier to succeed among small in-store retailers. 
    • None of the merchants we talked to had staff accepting cards throughout the store on mobile devices, so mobility is not always necessary. 

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The Mobile Card Reader Landscape

Companies disrupting the legacy payment hardware and software market — start-ups like Square and ShopKeep — seem to have had incredible success gaining adoption among small businesses.

These companies offer mobile point-of-sale (mPOS) solutions that include a software and a hardware component.

  • The hardware side includes a mobile device — a smartphone or tablet, sometimes provided by the mPOS company but more often purchased by the merchant — and a card reader that plugs [...]