With the NFC market still as dormant as Jefferson Airplane (talked about for years, still kicking around and never sure when they’ll make another appearance), recent announcements about turning a mobile device into a credit card terminal using applications got me thinking. Will SMB’s lay the groundwork to mobile payments success? The two announcements I’m referring to are from a start-up named Innerfence and the well known developers of Quicken; Intuit. With both of these services, SMB’s will be equipped to type a credit card number, securely transmit the payment details for processing and email or SMS the receipt to a customer.

Initially, I began wondering whether SMB demand even existed for these merchant solutions. After speaking with fellow YG analyst Steve Hilton, the answer was yes and the discussion moved beyond SMB demand. Although these solutions have too many fees (interchange fees, monthly account fees, and setup fees) the fact that a field service worker does not invest in an expensive network connected payment terminal will force SMB’s to consider this solution. Assuming that these services fulfill all PCI compliance regulations, our discussion quickly evolved into one of consumer interest in this solution. While the merchants certainly would see the benefit of a portable credit card solution, would a consumer feel comfortable handling a credit card over to an electrician they found on Craigslist?

This issue of consumer acceptance will plague the usage of these solutions. Although an SMB can launch a credit card transaction service for a nominal cost (Intuit charges $59.95 setup + $19.95 monthly fee and Innerfence charges $49.99 to download the mobile application and $25 monthly fee), a large amount of consumer education is required to ease concerns about the security of these services. Although handing someone your credit card at a restaurant and having them disappear for a few minutes or having a shopkeeper without a broadband or dial-up connection take a paper imprint of your credit card has risks, consumers are conditioned that this is acceptable. It will require years to change those beliefs in the minds of consumers and will limit the acceptance of portable credit card services for the SMB channel.

When we get to NFC, which Yankee Group’s soon to be released forecast expects only 13 million NFC enabled devices in North America by 2013, NFC processes will ease some of the consumer hesitancy in handing over a credit card to a cell-phone-wielding electrician. Having an electrician type your credit card digits into his cell phone feels a lot more risky than the electrician tapping his cell phone against your credit card. Consumers will be able to tap a device against a merchants phone to pay for a service and although it will not eliminate the security concerns, it will eliminate the need to manually type credit card details.