Without credit cards, getting paid will get a lot quicker, easier, and cheaper.
This article is part of Inc.'s special report on How (and Where) to Make Money in 2013 (and Beyond). Follow the links at the end of the story for more game-changing trends, bold predictions, and hot markets to watch next year.
Smartphones are displacing credit cards the way plastic once toppled cash. Google got the ball rolling, with Google Wallet. Now other big names are getting in on the game--AT&T, Verizon Wireless, and T-Mobile, for example, are collaborating on a mobile wallet called Isis.
But the biggest game changers so far have been--no surprise--entrepreneurs. Square, a start-up launched in 2009 by Twitter founder Jack Dorsey, offers simplified credit card processing via a credit card reader for mobile devices. Merchants can use Square to swipe cards on a smartphone or tablet instead of a traditional credit card terminal; customers can use it to pay via smartphone, à la Google Wallet. And Square's straightforward fee structure--$275 per month with 0 percent processing on the first $250,000, or 2.75 percent per swipe--has proved to be a welcome alternative to traditional models that charge merchants as much as 5 percent of the purchase price, plus additional fees.
Dwolla, an online and mobile digital-cash network based in Des Moines, takes things further, by cutting out credit cards altogether. The brainchild of Inc. 30 Under 30 honoree Ben Milne, Dwolla allows users to transfer funds directly between bank accounts, from a computer or smartphone, for a flat fee of 25 cents per payment, with no charge for transactions of less than $10. The company's MassPay feature, meanwhile, lets users send funds to as many as 2,000 people simultaneously, and has staggering implications for any business with a payroll. In April 2012, Dwolla was serving 15,000 merchants and processing more than $1 million in transactions daily.
Going into 2013, e-commerce increasingly means m-commerce, and optimizing mobile payments will be key for any business that sells online. Purchases made on mobile devices in the U.S. are expected to total $11.6 billion in 2012, nearly double those made in 2011, and are forecast to reach $31 billion in 2015, according to eMarketer. Roughly 34 percent of people surveyed by IDC Financial Insights in 2012 reported making mobile purchases, up from just 19 percent in 2011. That's impressive, especially when you consider how many potential buyers have looked--and balked--because the process for making purchases on a smartphone was just too unwieldy. (Ever tried tapping your credit card number into a form on a 2- by 3-inch screen?)
Chicago-based start-up Braintree saw opportunity in eliminating abandoned shopping carts. It offers a simple platform to enable one-tap purchases from mobile websites and provides customers with online and mobile payments processing--including in foreign currencies--for 2.9 percent of the purchase price plus 30 cents per transaction, with no monthly fees or minimums.
As customers use their smartphones for shopping, the devices will become a primary conduit for directing targeted coupons, rewards, and other special offers. Belly makes digital-based loyalty programs; think of them as electronic versions of the classic "buy 10 get one free" punch card. Merchants track purchases through an iPad; consumers use a smartphone app. Already, companies are getting creative with rewards: A sandwich shop will name sandwiches after repeat buyers; a grocery store lets loyal shoppers cut the line. Bottom line: The boring business of payment processing is getting pretty sexy. And that's good news for your business, too.