In 2007, Stanford neuroeconomist Brian Knutson, Carnegie Mellon behavioral economist George Loewenstein and their colleagues gave subjects $20 and stuck them in MRI tubes. While Knutson and Loewenstein watched their brains, these subjects made shopping decisions. They were told that if they chose to buy products at the listed prices, those products would then be shipped to them. What the researchers observed was that a high price literally lit the brain's pain center -- or at least the part of the brain that anticipates pain [source: Carnegie Mellon University].
Basically the study proved that a high price hurts.
But here's what else it proved: That price hurts less if you pay with credit than it does if you pay with cash. According to Loewenstein's study, which was published in the prestigious journal Neuron, people spend until the anticipated pain outweighs the anticipated pleasure. So if you're selling something, and you're trying to get customers to buy more, you'd do well to decrease this pain (or increase customer's pleasure, but that's another story). Offering customers the ability to pay with a card, even at a garage sale or a football game, "anesthetizes the pain of paying," according to Loewenstein [source: Carnegie Mellon University].
So, what does this have to do with the iPad and its card readers? Well, in addition to being undeniably aesthetically pleasing, your iPad can be a powerful tool of anesthetic. A top tier of at least five apps joined by a gaggle of others allow you to accept credit cards anywhere, anytime -- making it easier (and less painful) for your customers to buy your wares.
In fact, if you've been to an Apple store to buy an iPad, you've seen the power of this mobile payment system in action. There's no cash register. Instead associates roam the floor with high-tech swipers in hand, offering customer service and immediate sales assistance. A customer doesn't even get the chance to make that solitary walk from product shelf to checkout aisle, which would allow his or her prefrontal cortex one last chance to overpower the amygdala's product lust. The iPad credit card reader applications make the sales process immediate; it enables the sales associate to go where no cash register has gone before -- bravely out into the field to meet customers on turf that was previously off limits.
Now that we've investigated the "why" of the iPad credit card reader, let's investigate the "how" on the next page.
How to Use an iPad as a Credit Card Reader
Perhaps you've already used your iPad as a barcode scanner -- for example, to read grocery codes to find coupons and better deals. Well, forget about a built-in, point-and-click feature for accepting credit cards. Sure, you can type in a customer's credit card number by hand. But to accept cards efficiently with your iPad, you need hardware as well as software.
Fortunately, generally both the hardware and the app are free. Companies like Square, Inner Fence, AppNinjas, Pay Anywhere, Intuit GoPayment and Swipe It offer free app downloads and will then send you the hardware in the mail -- typically a small swiper that plugs into your iPad's headphone jack and reads a credit card's magnetic stripe. To make a sale, you open the app -- a simple screen that mimics a traditional cash register (with bonus features that you can experiment with once you're ready). Then you enter the total amount of the sale, swipe the card through the attached hardware, and the customer signs directly on the touch screen.
Most apps also do double duty with your iPhone, meaning that as long as a customer is comfortable signing his or her name in the equivalent of an 8-point font, you can even further miniaturize the sales experience.
But there's a reason the hardware is free. Square charges $0.15 per transaction plus 2.75 percent of the purchase for a swiped card (3.15 percent if you type in the credit card number). Swipe It charges a $15 set-up fee, $20 per month and $0.15 per transaction. Other apps require things like merchant accounts that sync with third-party verification sites like Authorize.net. These third-party sites may provide an app's security and functionality, meaning that the app itself is more a slick interface than a merchant account.
Do you plan to use the app one time to sell hundreds of Italian ices at a Fourth of July parade? Are you a psychologist who will you use it every workday to bill clients? Depending on sale volume and average sale price, a little nifty math should show you which app is most cost effective for your situation.
When picking an app, check for the following features:
- Mapped sales tracking: Will it sync with the iPad's GPS to provide reports of sales locations?
- Digital signatures: Almost all apps allow customers to sign the iPad's touchscreen.
- E-mail receipts: E-mailing PDFs from within the app allows easy receipts.
- Returns: Does the app manage full and partial returns?
- Customer tracking: Does this app keep track of your top customers?
These features sound great, but is your customer's credit card info safe when he or she uses this reader? We'll investigate that on the next page.
Is it safe to use an iPad as a credit card reader?
When you click "charge" on an iPad credit card purchase, the tablet converts your customer's data into radio signals, which are transmitted to the nearest cell tower, which converts the radio data into "wired" bits, which travel to a message center where these bits are converted to e-mail, which goes to the credit card app's parent company, which then contacts the bank that issued the credit card, which checks the customer's credit, and then reverses the whole process to send your iPad notification on whether the transaction is accepted or declined.
Besides being a mouthful, the preceding ultra-long sentence presents numerous steps that seem to offer the opportunity for someone with a long net to pluck that data right out of the air. But in reality, other than the initial link from iPad to radio tower (and back), this process is no different than what's always happened when a merchant swipes a card in a store. And it's not as if a financial hacker could tune a car radio to 107.5 and intercept these radio transmissions from iPad to tower. One of the leading iPad credit card software/hardware companies, Square, writes that in addition to "meeting all industry standard security practices," that "Symmetric cryptographic keys are required to be at least 128 bits long. Asymmetric keys must be at least 2048 bits long" [source: Square].
What this means, in plain English, is that even if data could be intercepted -- which it currently can't -- it would be extremely difficult to do anything meaningful with it. So if there's any weak link in the security chain, it's not the software or hardware; it's you.
The online magazine LinuxInsider quotes Dave Meizlik, director of product marketing at Websense, saying, "We will see cybercriminals successfully use mobile drive-by download attacks to steal confidential data and expose users to malicious content" [source: LinuxInsider]. For those of you who don't speak the language of LinuxInsider, these "drive-by downloads" are the hitchhiking malwares that may unexpectedly accompany anything you pull from the Internet to your tablet, be it a credit card app or just an unsecured game that happens to free-ride code that punks your credit card app. Few of these viruslike downloads yet exist, but as tablets gain popularity, hackers are ramping up. The moral of the story: Just as you are on your computer, be careful what you download to your iPad.
Outside downloadable malware, credit card theft remains much easier with the card in hand (say, when you hand it to a waiter at a restaurant), than it is over the data-encrypted communications lines that link your iPad with the financial world. And like credit cards themselves, reputable credit card reader apps offer dispute resolution services that can help you troubleshoot any security difficulties that arise.
For more information on apps, credit cards and other financial issues, visit the links on the next page.
- Bishop, Todd. "Inner Fencer Debuts iPad Credit Card Reader, Rivaling Square in Mobile Payments." GeekWire. July 25, 2011. (Oct. 8, 2011). http://www.geekwire.com/2011/fence-debuts-ipad-creditcard-reader-boosting-arsenal-square-mobile-payments
- Ferner, Matt. "11 Credit Card Apps, Swipers for iPhone, Android and Blackberry." PracticalECommerce.com. Jan. 6, 2011. (Oct. 8, 2011). http://www.practicalecommerce.com/articles/2497-11-Credit-Card-Apps-Swipers-for-iPhone-Android-and-BlackBerry
- Loewenstien, George; Brian Knutson; Scott Rick, G.; Elliott Wimmer; Drazen Prelec. "Neural Predictors of Purchases." Neuron. Jan. 4, 2007. Vol. 53, Issue 1, pp. 147-156.
- "Researching the pain of playing." Carnegie Mellon University. (Oct. 8, 2011). http://www.cmu.edu/homepage/practical/2007/winter/spending-til-it-hurts.shtml
- Simmermon, Jeff. "How data travels along a wireless network: with infographic." Time Warner Cable. June 29, 2010. (Oct. 8, 2011). http://www.twcableuntangled.com/2010/06/how-data-travels-along-a-wireless-network-with-infographic/