Money Talks: As Technology Continues To Advance, So Too Do Methods Of Payment

By Christine Pratt and Mike Irwin The Wenatchee World, Wash.

A busy morning at East Wenatchee's Glaze bakery and sandwich shop will have customers lining up, fresh-baked fritters and bags of ciabatta buns balanced on one arm as the other arm digs for cash or a debit card.

The bakery sells dozens of items that can be modified to the tastes of each customer, making for hundreds of options.

And the countertop device that tracks all the day's sales transactions is not a traditional cash register with bank-provided credit/debit-card processing electronics.

It's an Apple iPad fitted with a card-processing device called "Square." It's a simple system with a tiny, elegant footprint, but it's also a powerful business tool that tracks the day's sales -- right down to the extra cheese on Mrs. Schultz's Cuban sandwich.

It can save the environment, by issuing paperless, emailed receipts to customers who desire them and even send out inquiries to see if customers were happy with the food and service received.

Jim Eakle, who co-owns the business with his mom, Jennifer Eakle, set the whole thing up himself after the bakery's original, second-hand cash register broke down and needed a $500 fix.

Set up took hours, he said, but its working great and doing everything they need it to do. Merchant fees -- the percentage of every debit/credit transaction that banks keep as a processing fee -- dropped by two-thirds, Eakle said, by switching to the non-bank service. That rate has increased over time, he said, and is now on a par with the bank rates.

"At first we were suspicious," Eakle said of a device that's almost hokey-looking in its simplicity. "But it turned out to be a very good thing for us. I can't say enough positive things about it."

Square allows small-scale, smart-phone carrying entrepreneurs who could once receive payment only by cash, check or invoice, to accept credit/debit-card payments in the field, be it their customer's home or on street corner.

The growing, highly mobile preponderance of smart phones and tablets -- and the out-of-the-box thinkers who know how to exploit them -- have given rise to a host of new ways to pay and be paid that are catching on in the Wenatchee Valley.

A recent article in Banking Journal, published by the American Bankers Association, reports that the transaction value of online, mobile and "contactless" payments will double to $4.7 trillion by 2019.

"I love just seeing somebody who wants to sell some tomatoes doing it with a Square and credit card in the middle of the street," says Dan Paquette, president of Wenatchee IT-services company Key Methods.

On the buyer side of things, mobile-based payment systems store the user's bank account numbers to make the process of buying something online or via mobile device easier, Paquette says.

Here's a look at some of them:

Apple Pay

Apple launched Oct. 20 its self-lauded "Apple Pay," an app that works with a chip implanted in the company's latest smart phone. The app stores shoppers' bank account numbers, allowing them to pay for purchases by passing their phone near the merchant's compatible, in-store electronics, while they touch an "ID" icon on the phone.

Its sophisticated encryption system assigns a token code number to the transaction. The merchant never has access to the customer's actual account number, increasing security.

Only about 5 percent of all merchants nationwide were expected to have the electronics needed to process Apple Pay transactions at roll-out time, but big names, including Macy's, Starbucks, Walgreens and McDonalds reportedly already have it or plan to.

Local bankers say a system compatible with the Google-powered Android phone system is hot on Apple's heels.

Mobile wallets

This latest "mobile wallet" by Apple, builds on its iTunes music store, which already saves its user's credit/debit card numbers for quick use to buy songs or other digital content using a computer, tablet or smart phone.

Starbucks has a smart phone app that makes it easy for its customers to pay for their coffee drinks and snacks. Google has its own version for on-line purchases. Square has one, too. They and others haven't caught on among shoppers who seem content to continue using their debit cards, Paquette says.

PayPal

PayPal is possibly the best known on-line payment facilitator that isn't dedicated to a single merchandise source. It allows people to send money to each other using their email addresses.

Originally created to sync with the Internet auction site Ebay, PayPal gives shoppers an account backed by shoppers' bank account numbers to speed on-line payments.

"The biggest thing with PayPal is that an individual has the ability to accept payment without having a bank account or a merchant swiper," Paquette said.

Shoppers transfer money into their PayPal account with a credit card and can then use the account to conduct transactions with merchants without exposing their personal information. If someone buys something from you, the money goes into the PayPal account. That money can then be transferred to a bank account or used to pay for almost anything, anywhere in the world.

Bitcoin

This somewhat ephemeral system of on-line currency that allows transactors to be anonymous. "Think about Bitcoins as a measure of some kind of value," Paquette said. People get Bitcoins by allowing their computer to be used as an on-line repository for the currency in exchange for a fee, paid in Bitcoin, he said. The currency is not backed by gold or anything of traditional value. "It's this little web of deception," he said. "It's like the ultimate bartering system... The concept of it is very interesting." He added, "Right now, there's very little validation about who owns these accounts. It could be the drug dealer next door. It could be a terrorist. You really don't know who you're dealing with."

Recent viruses, called "ransom ware" infect computers with an encryption that makes them not function in some way. The hacker then charges a ransom in Bitcoin for a fix.

"It's not easy to trace the way a credit card transaction would be traceable," he said.

Security

Ease of purchase, be it by mobile wallet or even the common debit card, doesn't make these new systems immune from fraud, Paquette says.

Nationwide news of data breaches, including recent large ones at Target, Home Depot, Facebook and even Apple's iCloud, have caused doubt over the security of shoppers' personal information on line.

"All these methods are open to problems. All these suckers can be breached in one way or another," he said.

Shoppers can limit their exposure to fraud by limited the amount of cash in the accounts they draw from for their day-to-day purchases and by using a single debit card for such purchases.

"In today's society, you almost can't have some sort of digital footprint," he said. "But you can limit the funding sources, so all the real cash is in a bank, and it's pretty well tied down."

Back at the doughnut counter at Glaze, Jim Eakle says he's concerned about security breaches via his Internet-based Square sales-transaction system but considers it part of modern business.

"Anymore, its' just the way the world is going," he said. It's all on line. Everything is floating around out there, and there will always be somebody who knows how to hack it. I hope it doesn't happen to us."

Convenience, speed and security: High-tech pay methods add up for local businesses

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