Small Scanners Can Turn Cellphones Into Credit Card Processing Terminals

A number of big and small companies — including eBay’s PayPal unit, Intuit, VeriFone and Square — are creating innovative ways

for individuals to avoid cash and checks and settle all debts, public and private, using their cellphones.

A number of big and small companies — including eBay’s PayPal unit, Intuit, VeriFone and Square — are creating innovative ways

for individuals to avoid cash and checks and settle all debts, public and private, using their cellphones.

A number of big and small companies — including eBay’s PayPal unit, Intuit, VeriFone and Square — are creating innovative ways

for individuals to avoid cash and checks and settle all debts, public and private, using their cellphones.

Several of the companies have developed small credit card scanners that plug into a cellphone,

and for a small fee enable any individual or small business to turn a phone into a credit card processing terminal. [br]

PayPal’s cellphone app calls for only a simple bump of two cellphones to transfer money.

Apple has submitted a patent application for a cellphone payment system …

There is evidence that paper money is being used less often, according to the Federal Reserve.

Though cash payments are difficult to track, the number of noncash transactions in the United States grew from fewer than 250 a person in 1995 to more than 300 in 2006.

Data on the stock of small-denomination bills and destroyed bills indicates that the use of cash peaked in the mid-1990s and has been declining since, two economists at the Federal Reserve Bank of Cleveland found.

“When debit cards were introduced in the early ’90s, that was the beginning of the slow and gradual decline of paper checks and cash,”

said Red Gillen, a senior analyst at Celent, a research and consulting firm on technology and financial services, based in Boston.

Still, cash has remained essential in certain instances, like paying back a colleague for lunch, buying fruit at a farmers’ market or buying a beer at a cash-only bar. [br]

These new mobile payment technologies could finally change that, according to this article in the New York Times.

“The problem with cash is that it is tangible, it’s inconvenient, you have to carry around a bunch of bills and you have to continually go to the A.T.M.,”

said Jack Dorsey, a Twitter co-founder who is now the co-founder and chief executive of Square,

which makes a dime-size device that anyone can plug into the earplug jack of an iPhone or iPad to instantly accept credit card payments.

“If we can make cards more convenient and faster, it can replace a lot of the experiences around cash” …

The new services could have the biggest impact on the smallest businesses, like farm stands or house cleaners, that accept only cash and checks

because they do not have stores to house credit card terminals, and do not want to enter into complicated, long-term relationships with credit card companies …

Fraud protection offered by the credit card companies is the same as when the card is used at a cash register.

Some of the new companies say security against fraud might even be improved because they provide e-mail receipts,

and those from Square include photos and a map of where the transactions were made.

The death of cash has been predicted since the 1970s, when electronic transactions like direct deposit of checks were introduced.

But most digital payment experiments, like one in 2006 by Visa, have focused on swiping cellphones, as is popular in countries like Japan, instead of credit cards.

Mobile payments have not taken off in the United States because Americans are just as happy to reach into their pockets for a plastic card as for a cellphone.

Instead of replacing credit cards, technologies like Square and GoPayment rely on them.

Credit card companies stay in the middle, extracting a fee with each swipe or bump.