The Age of the Digital Wallet

Checking out used to be a matter of cash, check or charge. But customers increasingly request online and mobile payment options that make checkout quicker, and businesses want to reduce the fees paid for credit card transactions.

Accepting mobile payments can increase your sales and help you reach new demographics, but a savvy business wants to make the right choice-one that is both cost effective for business and secure for customers. It's a trend hitting businesses of all sizes. Larger retailers like Walmart are allowing website purchases using cash (you pay at pickup) and PayPal for in-store purchases. Smaller companies are choosing lesser-known options like Square, Bitcoin, Dwolla and Google Wallet. So how does a business choose?

PayPal

The granddaddy of online payment options, PayPal has recently expanded to include mobile payments and site-to-store payments (where you buy online and pick up at a store).

The pros of using PayPal include longevity and familiarity. But PayPal comes with some issues. It occasionally holds funds for three weeks or more before distributing them to a business, so businesses need to factor this possibility in.

Another big downside of PayPal is the fees. PayPal has some of the highest fees for online payments attached to a credit card (2.9 percent plus 30 cents per transaction). You can circumvent this online by allowing people to pay by virtual check, but you can't get around it at the register. Plus, to get the lower $0.025 fee option, PayPal holds money for seven days before releasing it to you.

PayPal does offer a verified account option that gives more security to both business and consumer. Getting verified means you attach a bank account and/or credit card, proving your identity to the PayPal system.

Square

My personal favorite mobile payment option is Square. Square lets a business accept credit cards without the cost of an expensive credit card machine or a merchant account. It is increasingly popular as a complete point-of-sale (POS) system for restaurants and mobile vendors. Just link it to your bank account online and request a free dongle. The dongle attaches to your phone or tablet, letting you swipe a customer's credit card quickly.

Square, which recently partnered with Starbucks as their preferred mobile payment option, also offers a mobile app called Square Wallet. It allows people to pay via a mobile app on their phone. Because it displays the customer identity, cashiers can thank customers by name. Square Wallet also allows a business to reward loyalty, all at a low 2.75 percent per swipe-a slightly lower fee than PayPal.

LevelUp

If you have a smaller business where rewarding local, loyal customers is a focus, you might consider accepting LevelUp. It is not as tested as Square or PayPal; however, those using it have expressed satisfaction with the way it is structured, and particularly with the flat 2 percent transaction fee per use. Like Square and PayPal, LevelUp requires a link to an external payment source. Users can (currently) only link to a credit or debit card, and this can be problematic if your target demographic has a shakier credit history.

Bitcoins/Dwolla

Bitcoins and Dwolla are interesting newer options.  Bitcoin value is generated by an open source computer program. Bitcoins are a bit like mining for gold; you use your computer's power to solve complex math problems and receive bitcoins as rewards. People with the most computing power have the most clout in mining Bitcoins.

As countries faltered financially, people turned to Bitcoins at an accelerated rate to protect their personal savings from austerity programs, causing the value of the Bitcoin units to spike recently before falling. Read Bitcoin Magazine online to learn about how they work.

Dwolla has a cash based system that removes credit cards from the equation altogether. It's by far the most cost effective cash service at $.025 per transaction (those under $10 are free), but implementation requires some technical finesse.

Dwolla is a secure, simple bank-to-bank transaction system that works online and on mobile phones, without a credit card. Setup is simple: get a free account, and add your business's banking information. Then add a Dwolla button to your website, and put it on your iPad or phone for POS transactions at the register. Dwolla charges 25 cents per transaction and money is available quickly.

Several major financial players are also finally getting into the mobile payment game, including Intuit, Chase Bank and Verifone. The drawbacks to using these include their high fees and merchant account costs. However, if you are a larger business or one where security outweighs cost concerns, it might be worth it.

What to Consider

Fees: The 2 to 3 percent per transaction threshold tends to be manageable for small to medium businesses, whereas a larger enterprise may find the yearly or monthly fees offered through banks well within their budget.

Learning Curve: Simplicity is powerful. If a payment service is too difficult to set up, use and maintain you and your customers won't use it.

Availability: Is it ready out of the box? There will always be new mobile payment options to consider, so businesses that need one now should choose a proven model.

Awareness: If customers haven't heard of it, they are less likely to use it. If you choose a lesser-known service, be prepared to do some marketing at the register.

Additional Features: Customers prefer using services that offer a range of payment options and continue to evolve. Choose a service that watches the mobile markets.

Site-to-Store Integration: Offering the same payment portal for your brick and mortar location and your ecommerce site is not a requirement, but it is a nice option. And remember, a great ecommerce site can offer more than one payment option.

In the age of the digital wallet, its important for businesses to keep up with the changes. Doing so will increase your customers' satisfaction and increase business.

Leslie @leslie Poston owns Magnitude Media, an emerging media and business development consulting service in Portsmouth. Visit her at magnitudemedia.net or twitter.com/leslie.

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