Innovation is always an integral consideration in any forward-looking strategy, and exhaustively planning for the future is something you are very familiar with as an entrepreneur. You’re probably aware, then, that innovation is now represented in advanced technologies that are continually providing advantages for small- to medium-sized businesses, and you’re probably ready to utilize of some of them. Of these technologies that are leveling the playing field, one in particular seems to be establishing itself as a must for small- to mid-sized businesses. That technology is mobile payments.
You may have considered all of the angles in a move to accept mobile payments, from cost of implementation and return on investment, but have you thought of any potential legal ramifications that may arise when you adopt the new payment technology? If not, then you should. Here are some legal tips to keep in mind when you consider mobile payments.
State Laws
State laws typically spell out all of the particular regulations on the transfer of money, mostly for tax purposes, and can vary considerably by state. You must consider, then, that mobile payments are not exempt from state laws and regulations on the transfer of money, and some states even have special regulations set up for mobile payments.
For example, Illinois actually banned the use of Square, a mobile payment and mobile wallet service provider, until Square Inc. agreed to pay a fee for a license to operate. Therefore, before committing to a service, you should read up on your state’s law and make sure there aren’t any barriers that will slow you down or prevent you from using the service altogether.
ID Theft
As technology evolves and advances, so too does the ability of hackers out to steal the identity of the unsuspecting credit card user. Even as your potential customers grow increasingly comfortable with alternative payment methods, identity theft remains a prevalent threat.
Mobile payments represent a new market for thieves and hackers, and some services haven’t had time to adapt to the attacks that might be used to steal information. It is essential that you make sure the service you choose has the right securities and safeties in place that will protect the servers that store your customer data.
Taxes
Tax implications can be accidentally overlooked when accepting mobile payments. You must remember to include a 1099-K form when reporting your taxes if you are using any third-party payment-processing service. Bear in mind that this only applies if you have more than 200 transactions handled by a third-party company, and eclipse $20,000 in a calendar year. You should receive a 1099-K form by January 31 of next year from your third-party service provider.
Privacy
Choosing a service that has a noted reputation for protecting the privacy of its users is a plus when it comes to both ID theft and your perception among your clients. In fact, the FTC has recently reported that the need for privacy in the mobile payments marketplace was among its top concerns. If the FTC is concerned about it, it should not be disregarded. In addition, your potential customers will be comfortable using a service that will keep their sensitive information private.
PCI Compliance
PCI compliance means that user credit card data is secure, and is required for anyone accepting Visa, MasterCard, American Express, Discover and JCB. Along with being absolutely mandatory, compliance is also a matter of ethical and professional responsibility. It is essential that you ensure that your chosen mobile payment processor is PCI compliant, just as you would a normal credit card processor.
A full-steam-ahead approach to embracing emerging technologies can help keep your business up to date and help you rise above your competitors, but a keen knowledge of potential legal pitfalls can be crucial to your success. If your analysis of mobile payments is exhaustive and you consider the points put forth here, you will have no problem adopting new mobile payment technology and taking your business to the next level without any legal issues.
This guest post is from Kristen Gramigna. She is Chief Marketing Officer for BluePay, a credit card processing firm that offers mobile credit card readers. She brings more than 15 years of experience in the bankcard industry in direct sales, sales management, and marketing to the company and also serves on its Board of Directors.