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Process Credit Cards on a Mobile Device? Here's the Good News & Bad News (and Good News!)

5. February 2015 07:57

man swiping a credit card on his phone

Credit card readers used to cost small businesses a good chunk of change. The reader alone could cost anywhere from $50 to $200 a pop. Then every time a card is swiped, the reader charges a percentage of the transaction amount plus an additional flat cut (maybe 15 cents a swipe).

That may not sound like a substantial amount, but think of it this way: every time a customer pays with a card, you're losing a bit of money to the third-party payment processor, and over time, that adds up. So if someone offered you a lower transaction-processing rate, you'd take it, right?

For many small-business owners, the answer to that question is a resounding "yes." And mobile credit card readers have been pandering to that pain point.

First, there was Square. You simply download the app, plug the free credit card reader into your smartphone, and start swiping. Unlike traditional readers, Square charges a 2.75 percent transaction fee. And now, Amazon is undercutting that rate with its own reader that charges a mere 2.5 percent per transaction.

The result? Switching to mobile credit card readers…

Plus, many mobile terminals may accept cards with chips, allowing you to keep up with changes in the credit card industry. In fact, once Square releases its chip-based terminal, you may be expected to pay the cost of any card fraud that occurs if you don't accept chip-based cards.

But it's not all sunshine and ponies. As promised in the title of this post, there is a drawback to using mobile credit card readers. Specifically, using these devices increases your cyber liability exposure.

The Bad News: Mobile Card Readers Can Be a Significant Liability

As we mentioned in the post, "Use Mobile for Business? Your Cyber Liability Is Probably Through the Roof," smartphones can be a real vulnerability for small businesses – especially in bring-your-own-device (BYOD) workplaces. If you let employees use their own phones and card readers to process customer transactions or you use your own phone or tablet for transactions, customer data could easily be exposed. That's because…

While it may benefit your business to be able to process customer payments anywhere – say, at a tradeshow or conference – know that your smartphone is not infallible. The more sensitive data you store on your device, the messier and costlier a breach on your smartphone will be. For more on that, read "Top 8 Data Breach Misconceptions."

But Wait, There's Other Good News!

So you want to use mobile credit card readers, but you're gun shy because smartphones are an easy avenue to data breach city. Before your adrenaline goes into overdrive and you chain your smartphone to your body, know there is a solution to this conundrum: Cyber Liability Insurance.

Now, there's no such thing as an insurance policy that prevents data breaches from happening. But if your risk management strategies fall short and you suffer a breach because of a lost smartphone or a compromised WiFi network, your first-party Cyber Liability Insurance can cover the cost of…

Also worth noting: there's no other insurance policy that offers this kind of protection – not your General Liability Insurance and not your Professional Liability Insurance. Read more about that here: "Why Your General Liability Insurance Doesn't Cover Data Breaches."

When you have a Cyber Liability policy in place, you give yourself the peace of mind you need to responsibly use your mobile device to process credit card transactions. So get out there and make that money, honey.

Tags:

Cyber Risk Insurance | Data Breach | Small Business | Small Business Risk Management | Small Business Trends | Tips for All Small Businesses

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