Will that be cash or credit?

Mobile card readers allow virtually anyone to use smartphones, tablets to accept credit cards

Michael Gokturk's company, Payfirma, is introducing a new iPad-based point-of-sales system

As the founder of Twitter, Jack Dorsey knows how to create a buzz.

So when he recently announced that the other company he founded – Square – is now providing its free mobile credit card reader in Canada, it got nationwide coverage.

With all that excitement, one could be forgiven for thinking that, until now, businesses in Canada had no way of using their smartphones or tablets for processing credit cards.

In fact, Greyhound, United Van Lines and 1-800-Got-Junk are just a few of the companies that already use Payfirma's e-commerce services, which include mobile card readers, similar to Square's, as well as traditional point-of-sales card readers.

"Square has done a phenomenal job in turning individuals like you and I into card-accepting people," said Michael Gokturk, founder and CEO of Vancouver-based Payfirma.

Both Payfirma and Square provide mobile card readers that plug into the headphone jacks of smartphones or tablets to process credit card transactions. PayPal and Moneris offer similar products.

Gokturk doesn't consider Square as Payfirma's competition because it's designed for the occasional user – hotdog vendors, hairdressers, even babysitters – whereas Payfirma's services are designed for businesses doing at least $100,000 a year in credit card transactions.

Mobile credit card processing is just one subsector of an exploding m-commerce space.

"We've got thousands of customers using our mobile solution – anywhere from small businesses all the way to large enterprises like United Van Lines," Gokturk said. "We're on track to do over $6 million in revenue in our second year."

Square's mobile credit card readers are free, and there are no signup fees or monthly charges. However, the company charges 2.75% per transaction.

That's 1% higher than what most companies charge to process credit card transactions, said Dan Kelly, president of the Canadian Federation of Independent Business. Because of its high transaction fees, Square makes sense for small businesses that only want to do the occasional credit card transactions.

"The biggest segment that this helps are those that are mobile business, like a plumber," Kelly said. "This has some real potential for those independent guys. For the micro-sized businesses, this can be really helpful."

Payfirma charges $99 for its reader, although it's free to companies doing $500,000 or more per year in transactions. Payfirma charges a $25 setup fee, a $10 monthly fee and a monthly transaction fee that, depending on the card, ranges from 2.06% to 2.99%.

Whereas Square is the third-party processor, there is no third-party processor in Payfirma transactions.

Most card readers for smartphones and tablets are designed to scan the magnetic strips of credit cards. Because they're vulnerable to fraud, banks and credit card companies in Canada and the U.K. have been moving to chip and PIN systems – also known as EMV technology – which are more secure.

Payfirma plans to launch a chip and PIN reader in 2013's first quarter. The readers will be more expensive but more secure. They'll also be able to process bank-card transactions.

In addition, Payfirma plans to roll out a new iPad-based point-of-sale system that will allow companies to do all their credit card and bank card processing via iPad.

"Our tablet offering really is designed for the new business opening up," Gokturk said. "You get everything – your iPad, your cash register, your printer, everything you need to open up a retail store. All you need is a tablet – whether it's iPad or Android or even Windows Surface – and now you turn every salesperson in your store into a roving cashier."

A beta version of the new tablet POS system is scheduled to be rolled out this month. •