People around the world are drastically altering their behavior in ways never before seen in response to COVID-19. It’s as if the world had a big “DO NOT TOUCH” sign hanging from it.
While there is reportedly very little chance of contracting the coronavirus from touching any surface, 55% of U.S. consumers are still concerned about handling cash.
As a result, cashless and contactless payments are booming in the U.S.:
- In March 2020, 31 million people in the U.S. used a contactless card or digital wallet to make a purchase, an increase of 6 million from those who did so in November 2019.
- 80% of all contactless payments are for $25 or less, a price range that previously was dominated by cash payments.
- 69% of people making contactless payments state that doing so is more convenient than using cash.
Retailers looking to support cashless transactions need to consider which cashless payment apps offer the best rates on merchant fees.
Comparing Fees of the Top Cashless Payment Apps
A comparison of the fees charged by five popular cashless payment apps illustrates the various approaches they take when charging stores for cashless transactions.
Apple Pay
This app for iPhones and Apple Watches trails only Google Pay in terms of number of users. The mobile wallet works with participating near field communication (NFC) contactless payment terminals, and is also used for making in-app and online purchases.
Merchants aren’t charged for debit card payments made via Apple Pay, but the service charges a fee of 3% for credit card purchases. As the Apple Support site explains, in-store payments made with Apple Pay are considered “card present” transactions, while those made within apps or on the web are treated as “card not present” purchases, which typically cost more to process and entail greater liability.
Google Pay
Formerly known as Android Pay, this mobile wallet app allows users of Android devices to make contactless NFC payments, as well as in-app, online, and peer-to-peer purchases. As with Apple Pay, Google’s cashless payment app doesn’t charge for debit card transactions, but levies a fee of 2.9% on in-store credit card purchases.
Google Pay requires retailers to install payment terminals that support contactless NFC transactions. Also, online transactions made with Google Pay are deemed “card not present” and are subject to transaction fees that range from 2.87% to 4.35%, based on the level of risk assigned to the purchase by the credit card processor.
PayPal
The long-time online payment market leader has released a cashless payment app that is free to use for person-to-person payments from a PayPal account or a linked bank account. However, the service’s merchant-fee structure “can be complicated and difficult to understand.”
PayPal’s merchant fees page explains that online transactions made in the U.S. using a PayPal account incur a fee of 2.9% plus a fixed fee based on the currency used. The fee for purchases made outside the U.S. is 4.4% plus the currency-based fixed fee. For in-store purchases, the merchant fee is 2.7% for U.S. purchases and 4.2% for transactions completed outside the U.S.
| Learn more about POS payment options in “Point of Sale Payment Processing: The Ultimate Guide.” |
Samsung Pay
This cashless payment app is designed for users of Samsung Galaxy devices who are given the option of choosing either Samsung Pay or Google Pay as their default for purchases made with Galaxy products. In addition to supporting NFC technology, Samsung Pay can be used to make purchases via magnetic secure transmission (MST) for payments via traditional magnetic card readers.
All transactions made using Samsung Pay are treated as standard credit card transactions, so each bank’s credit card merchant fees apply. Samsung provides a list of the banks and credit unions that support Samsung Pay.
Venmo
Similar to PayPal’s cashless payment app, Venmo lets users send money to individuals or make in-store and online retail purchases. There’s no fee for customers who use their linked bank account, but credit card transactions are subject to a fee of 3% of the transaction amount.
Merchant fees for Venmo purchases follow the rates of PayPal’s Braintree service: 2.9% plus 30 cents per transaction. For purchases made using non-U.S. currency or using a credit card issued outside the U.S., a 1% charge is added.
Other Cashless and Contactless Payment Options
Determining the best cashless payment apps to support is one of several challenges facing small business owners as they transition away from traditional cash registers. These are among the options available to small retailers planning to support cashless payment apps:
- Zelle makes it easy to send money to someone via the recipient’s email address or phone number, even if the person doesn’t have the Zelle app installed. However, the recipient must have a U.S. bank account. Using Zelle for a small business requires a bank account that supports the service; and it should be noted that fees for business transactions are set by the bank.
- Facebook Messenger allows users to send money to friends and family from a bank-issued debit card or PayPal account. The service is available only in the U.S., but it is not intended for use by businesses. Plus, purchases made outside the Facebook Marketplace don’t receive purchase protection.
Retailers know the importance of saving money wherever and whenever it’s practical to do so. In the rush to support cashless payment apps, it’s important for stores to consider which services offer the best combination of customer-pleasing payment options and merchant-pleasing transaction fees.
In a period of change, talech has a number of POS solutions that can help your business adjust operations smoothly. From reaching new audiences to engaging with your existing customers more often, we give you the tools to adapt quickly and with confidence.
