Square And PayPal Push The iPad-ification Of America's Small Businesses

Square, PayPal, and Groupon all made news today with the common goal of getting small businesses to junk their cash registers for Internet-connected devices that promise to bring the simple act of settling accounts into the future.

Change With Your Coffee

I work from home, but every morning I wake up, take a shower and go straight to work from my local coffee shop. About half of those days I stop at the neighborhood ATM kiosk to grab some cash. Call it quaint, call it archaic, but my local coffee shop only takes hard currency.

The coffee shop, 1369 in Cambridge's Inman Square, is really the only reason I bother using cash at all. 1369 is a little old school, a little hipster. Cash sales were kind of its “thing.” That’s why I was surprised the other day when I ran into 1369’s owner, Josh Gerber, and he told me that the coffee shop was going digital with the Square Register.

To me, this is disruption personified. No longer are we talking about some abstract concept of how smartphones and tablets could change businesses at the local level. We are seeing it in action on a tangible scale on the street, in our neighborhoods and, yes, at our local coffee shops. 

Mobile Reshapes Main Street

Leading the charge in this changing business landscape are companies like Square, PayPal, LevelUp, Intuit, Groupon, Revel and a variety of others. The task these companies have taken on is no easy challenge – each aims to redefine the point of sale and replace one of the most common items for Main Street business: the cash register.

The chosen vehicle to replace the cash register? The iPad.

Call it the iPad-ification of the point of sale or the mobilization of American’s businesses. We are now starting to see distinct results from several years of ecosystem growth and product releases intended to change the way that basic commerce is conducted. 

Square is the leading disruptor. It was the company that made the original card-swiping device for the iPhone and, later, the iPad. With its Square Register software, it introduced one of the first connected point-of-sale solutions. Today, Square took that a step further by announcing the Square Stand, a full replacement for the cash register that holds an iPad, includes a built-in credit-card swiper and allows business to connect cash drawers and receipt printers. The Square Stand, due out in July, is available for pre-order for $299.

Not to be outdone, PayPal announced at the same time a new program called “Cash For Registers” where it will buy old registers from businesses that wish to install PayPal Here, its own iPad-oriented point-of-sale system—and it's waiving payment-processing fees for the rest of the year.

 

Groupon also unveiled a new iPad-friendly version of its Breadcrumb point-of-sale software today.

Already, Revel Systems uses the iPad and Intuit can install any variety of smartphones or tablets into an effective register replacement. 

Conceptual To Implementation

Four factors are driving the implementation of iPad point-of-sale systems in small and medium-sized businesses:

  • Install cost: It is often cheaper to buy an iPad and a couple of accessories that it is to go through a major point-of-sale vendor like Aloha or Micros, whose devices can cost thousands of dollars apiece.
  • Interchange: The classic credit-card readers often have a variety of hidden costs for the business. They take a few percentage points of the total sale and often have a monthly fee or minimum that must be reached by the merchant, driving up their take to an effective rate of 3 to 5 percent for many merchants. Square charges interchange of 2.75% with no hidden fees on swiped transactions. A company like LevelUp does not charge interchange, but rather makes money as a marketing and advertising platform, offering incentives to users. 
  • Mobile acceptance: A couple of years ago (even last year, when we first noticed the iPad point-of-sale trend), smartphone and tablet adoption were still in relative infancy. That has changed in a big way extraordinarily quickly. In just a few years, smartphones are now the norm. Second and third wave mainstream consumer adopters are now looking at them not as some weird fad but as practical tools for solving problems.
  • Ease of use: Anyone can hit a few buttons on an iPad and swipe a credit card. Proprietary register systems pose a training nightmare. 

Square's new Stand product promises to be more durable than the older plug-in card swiper. Square merchants like Blue Bottle were known to stock multiple replacement swipers in case one went bad—but no one wants to fiddle with hardware while customers are waiting.

PayPal is taking a less prescriptive approach than Square's integrated hardware and software, but it too is pushing iPad-based solutions. It rolled out an iPad version of PayPal Here in March, with one nice feature from its parent company, eBay: Merchants can scan barcoded inventory for easy input into the register's list of items for sale.

"The reason the iPad is such a great device is it's touchscreen; you can integrate it with devices like receipt printers; it's relatively affordable," says PayPal president David Marcus. "It's the ideal device."

Marcus says PayPal's seen many merchants upgrade from the smartphone version to the iPad version.

"We just want to accelerate the inevitable," Marcus says of PayPal's move to offer free payment processing to merchants who take it up on the register turn-in offer. The cash register "is a dumb device," he says, that doesn't handle features like loyalty tracking or remote ordering.

At 1369, Gerber knew that he would eventually need to go digital, at least to the bare minimum of accepting credit cards. Yet, the average check at 1369 (or really any other coffee shop) is in the $4-$5 range. When you are processing a lot of small transactions, that interchange rate becomes painful. That is why it is good for businesses when payment processors battle on interchange and lower rates for everybody.

We are now in a phase in the Mobile Revolution where we are seeing concepts become reality. This is not just some startup CEO saying, “I am going to change the world” or a huge gadget manufacturer telling us that this is the next big thing. These are real implementations we can see, feel and touch, in our neighborhoods and at our coffee shops. 

Photo via 1369 Coffee House

Owen Thomas contributed reporting to this story.