Tablet-Based Launches Come with Pricing Deals to Attract Merchants

The nascent trend toward tablets as cash-register replacements took several big steps forward this week, as technology players and at least one processor unveiled major promotions, including free transaction processing and other pricing deals, to entice small businesses to adopt mobile payments.

On Wednesday, merchant processor Vantiv Inc. launched Vantiv Mobile Checkout, an iPad-based product offered as part of an alliance with NCR Corp. and its NCR Silver tablet system. Vantiv says the new service comes with an “affordable introductory price.” A day earlier, PayPal Inc. announced it will waive processing fees for any business that adopts its 14-month-old PayPal Here mobile point-of-sale product, which works with both smart phones and tablets, in place of a cash register.

Virtually at the same time, Groupon Inc. launched Breadcrumb POS, an iPad app based on the Breadcrumb payment and business-management technology the online-offers giant acquired a year ago. As part of the offer, Groupon says it will waive processing fees on the merchant’s first $5,000 of credit card volume. Its published fee for Breadcrumb POS is 1.8% plus 15 cents per transaction. PayPal Here’s pricing is a straight 2.7%.

The fee waiver from PayPal, however, starts in June and is good until the end of the year on all payment types.

Vantiv’s “affordable introductory price,” available for an unspecified limited time, is a rate of 1.99% to the first 10,000 merchants that adopt Vantiv Mobile Checkout. The rate applies to qualified transactions, in other words those that include data processors specify to control fraud.

The Vantiv package also carries a fee of $29 per month for a bundle including a receipt printer, cash drawer, stand, and encrypted card reader.

George Peabody, an analyst at Menlo Park, Calif.-based Glenbrook Partners, says the nascent price war has as much to do with competition as it does with the need to draw in small merchants, the chief target market for tablet-based cash-register replacement. A slew of providers have entered the market since Apple Inc. launched the iPad in 2010. They are now competing with established players that had introduced payment gear for smart phones and then added tablets.

As if to underscore Peabody’s point, there was mixed in with the announcements over the past two days one from mobile-acceptance startup Square Inc. The San Francisco company on Tuesday introduced Square Stand, a $299 hardware piece that props up a countertop iPad and includes a card reader as well as connections for various peripherals. The new product is meant to work with tablets that run Square Register, the company’s POS app for small merchants.

But the need to offer tablet-based systems that can replace the functions of an electronic cash register is also forcing these companies to form alliances. NCR Silver is powering the app for Vantiv Mobile Checkout and is also part of a small constellation of technology players helping to forge a pathway to small merchants for PayPal Here on the iPad. Others working with PayPal include iPad POS startups like ShopKeep POS and Leaf.

“We have been partnering with PayPal for a year now,” says ShopKeep in an email. “Because we have an open platform, we welcome working with processors of all types. Specifically, [PayPal’s] mobile-payment functionality is integrated into our iPad register.”

There could be plenty of business to go around. Up to 50% of small and medium-size businesses are using or considering using a tablet or mobile POS system, according to McKinsey & Co. research cited by Vantiv.

Meanwhile, Square revealed that businesses using its iPad app now account for almost half of its total transactions. The average volume these users process is more than twice the volume processed by smart-phone users, Square added. The company, which launched in 2010 with a cube-shaped card swiper for smart phones, is now processing more than $15 billion in annual volume, a figure that doesn't include an arrangement by which Square handles acquiring for Starbucks Corp.