Cashless payments are booming. Capgemini’s World Payments Report 2020 forecasts that the number of digital wallet users worldwide will increase from 2.3 billion in 2019 to 4 billion by 2024, representing half of the world’s population. As consumers increase their use of payment apps such as PayPal and Venmo, and mobile wallets such as Apple Pay, Google Pay, and Samsung Pay, customers and merchants alike need to be aware of the costs associated with the use of cashless apps.
Topping the list of potential “gotchas” when paying via cashless apps is the fees that are charged by the services, which aren’t often transparent to users or to merchants. Knowing the true cost of using cashless apps requires understanding how the services make money, including the fees they charge for specific operations, such as transferring funds from a linked debit card or bank account.
Here’s a rundown on the fees that the five most popular cashless apps charge to consumers and merchants.
There’s no fee for consumers to make purchases on PayPal unless the transaction involves a currency conversion, in which case the fee is 4 percent, 3 percent, or an amount that’s disclosed at the time of the transaction, depending on the type of transaction. There’s also no fee for sending or receiving money from a PayPal balance or bank account, but personal domestic transactions to send money using a card entail a fixed fee of 2.9 percent.
Transferring a balance from a personal PayPal account to a bank account or linked debit card incurs a fee of 1 percent, although there are withdrawal limits. There’s also a fee of $1.95 for linking a credit card or debit card to your account.
For PayPal merchants, commercial online transactions incur a fee of 2.9 percent plus a fixed fee of 30 cents in the U.S., and in-store transactions are charged a fee of 2.7 percent plus the fixed fee. QR code transactions in amounts greater than $10 are charged a fee of 1.9 percent plus a fixed fee, while QR transactions less than $10 entail a fee of 2.4 percent plus a fixed fee.
The service doesn’t charge any fees for sending money from a linked bank account, debit card, or a Venmo account, or for receiving or withdrawing money from a Venmo account. However, Venmo does charge a fee for “premium features and other services”:
- A fee of 3 percent is charged when sending money using a credit card.
- Receiving money in a business profile from Venmo users incurs a fee of 1.9 percent plus 10 cents.
- Adding money to your account via a payroll or government check entails a fee of 1 percent and a minimum fee of $5.
- Doing so via any other type of check requires a fee of 5 percent (minimum $5).
- Electronic withdrawals via the Instant Transfer feature incur a 1-percent fee (minimum 25 cents and maximum $10).
Consumers who use Apple Pay are not charged a fee for transactions with restaurants or retailers because the sales are considered “card present” by merchants. However, there is a 3 percent charge for transferring money to another Apple Pay user via a credit card linked to the account (there is no charge for transfers via debit card accounts). In addition, Instant Transfers using the Apple Cash service incur a 1-percent fee (minimum fee of 25 cents and a maximum of $10).
Merchants who accept Apple Pay aren’t charged a separate fee for debit card transactions but will be charged a fee of 3 percent for credit card sales. Unlike in-store purchases, sales made via online or within the application are considered “card not present” transactions that are typically more expensive to process and entail greater liability.
Google Pay’s fee for credit card transactions is 2.9 percent. There are no fees charged for debit card sales and other transactions. While there are no merchant charges with Google Pay, the service requires that retailers install payment terminals that support Near Field Communication (NFC) contactless transactions. In addition, credit card companies charge their standard transaction fees for Google Pay purchases that range from 2.87 percent to 4.35 percent, depending on the level of risk that the credit card processor assigns to the transaction.
As of November 2020, instant money transfers from Google Pay to a debit card incur a fee of 1.5 percent or 31 cents, whichever is higher, as the site Android Police reports.
This mobile payment app is available for Samsung Galaxy phones and smartwatches, although some devices are limited to the use of NFC technology for completing payments. It works with Visa, Mastercard, Discover, and American Express cards, as well as with a debit card called Samsung Money that’s offered in conjunction with personal finance service SoFi. Because it supports a technology called magnetic secure transmission, Samsung Pay works with traditional POS systems as well as newer contactless POS devices.
Sales made using Samsung Pay are treated as standard credit-card transactions, so merchant fees are based on each bank’s rate.
A Winning Cashless-App Strategy for Retailers
Retailers succeed by meeting the ever-changing needs and preferences of their customers, but they walk a tightrope to ensure they are neither too slow nor too fast in adapting to changing tastes and market conditions. This is the perfect time for shops to reconsider the payment options they accept, keeping in mind that cash remains the second most popular means of making purchases.
The goal is to maximize the potential of your store’s POS system by choosing the right mix of hardware, creating a customer-drawing online presence, and integrating all your business processes in a way that makes your shop and its employees as efficient as possible. Once you’re confident that the cashless strategy you choose is the best fit for your business model, you’ll be ready to reap the benefits of lower banking fees, enhanced security, and happy customers.
In a period of change, talech has a number of POS solutions that can help your retail business adjust operations smoothly. From reaching new audiences to engaging with your existing customers more often, we give you the tools to adapt quickly and with confidence.
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