Square and PayPal have given small businesses a new way to accept credit cards, but the tech isn't as popular as it seems

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One of Square's mobile terminal products.

All over you see small businesses with smartphone and tablet credit card readers that seem to have replaced bulky payment registers.

But these devices from companies like Square and PayPal may be less disruptive than initially believed.

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To better understand how small businesses are accepting payments BI Intelligence canvassed a number of merchants in New York and found that while many of them have mobile card readers, few actually use them.

In research from BI Intelligence we go into the field to see which business have mobile card readers, what they like and dislike about them, and whether they plan to use them in the future. From here we gauge how big an impact these devices will really have on traditional payment terminal providers

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Here are some of the key takeaways from the note.

• We were surprised to find that mobile credit card readers were not as widespread as the data suggests. Several surveys have shown that 40% of small- and medium-sized businesses in the US use mobile card readers. But, among the two-dozen small merchants we surveyed, only five, or 23%, had tablet-based point-of-sale devices (POS). None of them used a smartphone.
• Worse, merchants who had mobile card readers didn't actually use them. Of the five merchants who had a tablet as their primary point-of-sale/acceptance device, only two actually used them. One of them used a tablet integrated into a stand with a card reader, and the other used a dongle, or hardware attachment.
• The merchants told us that the hardware wasn't rugged enough and the software was buggy. While inexpensive, solutions that use consumer-oriented smartphones and tablets (i.e., Apple and Android devices) end up leaving merchants frustrated because these devices are not rugged or designed for heavy use in retail environments and because the software is often "buggy."

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