Dongle Domination: 40% of SMBs Use Mobile Card Readers

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Screen Shot 2013-08-02 at 2.07.52 PMHang on to your wallet; the revolution in payments might be starting on the other side of the counter.

A new report from BIA/Kelsey finds that 40% of small and medium-sized businesses already accept payments with a mobile credit card reader, and another 16% of the businesses plan to add capability within the next year. The numbers come amid an across the board increase in small business engagement with the digital tools, as social media and mobile advertising are also taking a larger chunk of business owners’ time and money.

The findings indicate an aggressive penetration of the market, and suggest that the threat to the long-established payments-processing industry might be more imminent than previously thought. According to the report, adoption of the mobile card readers has accelerated rapidly in recent months, shooting up nearly 50% since the firm’s last study in October of 2012.

Square gained early traction among smaller retailers and restaurants. However, the bulk of the recent growth has come from larger, more established, businesses, says Steve Marshall, director of research at the  firm. The report found that more than half (53%) of the larger SMBs surveyed used a service like Square or PayPal Here, nearly double the adoption rate for the segment of smaller businesses.

“In general, I see the small and lower-end of the market lagging behind the higher-end in almost every kind of technology, ad spending, or new product invention,” says Marshall. “It’s just a smaller world.”

Since Square opened the market in 2010, a rash of startups and a handful of large enterprises have launched similar initiatives. Marshall says that PayPal Here, which the company launched in the spring of 2012, has “by far the largest share of the market,” supporting a number of other studies. Square comes in second followed by Intuit’s GoPayment service.

The growth of mobile payment processing is one sign of a broader warming among small businesses to digital technology, as merchants ratchet up investment in digital marketing channels as well as new tools to help manage day-to-day operations.

The report found that small businesses are investing more and more time and money into social media, moving from a test-and-learn mentality to an investment mindset. The percentage of businesses using social media has leveled off somewhat, but the amount of businesses who use Facebook frequently has increased dramatically.

“The intensity of usage, the importance that SMBs assign to [social media,] how often they use it, their assessment of its importance — all of these metrics have dramatically increased since we first starting asking about it four years ago,” said Marshall. “The majority [of small businesses surveyed] say they use Facebook for customer acquisition. It’s a hardcore business tool like direct mail.”

With over half of businesses saying they use Facebook, the social network is already a powerhouse in local — the question is whether it can turn that engagement into paying accounts, a challenge which it still has to prove.

Steven Jacobs is Street Fight’s deputy editor.