clock menu more-arrow no yes

Etsy Introduces Credit Card Reader to Go Beyond the Web

Etsy wants a cut at the craft sale.

Sara Forrest

Online marketplace Etsy will start offering free credit card readers to some of its U.S. sellers as part of an effort to extend its reach beyond the Internet.

The dongles, which can be plugged into a smartphone or tablet, will be used in conjunction with an Etsy app to allow sellers to accept credit card and debit card purchases while hawking their wares at craft fairs and in other retail settings. Etsy says more than a third of the people who sell goods on its online marketplace who are based in the U.S. also sell their products at craft fairs.

With the launch, Etsy will for the first time start earning a cut of transactions that happen away from its digital platform. Sellers using the credit card reader will pay Etsy 2.75 percent of each transaction. The readers are only available to sellers who use Etsy’s own payments platform, called Direct Checkout, to accept credit and debit card purchases on Etsy.com and on the Etsy app. Etsy declined to provide information that would be helpful in figuring out how many of its current sellers would qualify to receive the free reader.

The new product will pit Etsy against other reader providers such as Square, PayPal and Amazon. Square charges the same 2.75 percent fee as Etsy while PayPal charges 2.7 percent. Amazon is taking just a 1.75 percent cut on purchases through the end of 2015, but will raise the fee to 2.5 percent after that.

Etsy is not pretending that its reader will be a Square killer, but it does believe its reader comes with some advantages that will help it stand out. For one, the reader, which is branded with Etsy’s name and orange company color, will integrate with a seller’s online shop so items sold with the reader are automatically deducted from the stock of the seller’s Etsy shop. Etsy will also send electronic receipts to customers who make a purchase using the reader that will include information about the seller’s Etsy store to try to build a deeper seller-customer relationship.

“Sellers were asking for [the reader] in an interesting way,” said Camilla Velasquez, director of payments and multi-channel sales at Etsy. “They were not saying, ‘I want a reader.’ They were saying, ‘I want a way to manage my inventory when I’m on the go’ and ‘I want a way to tell buyers I meet in person how to keep in touch.’”

As a result, Velasquez believes the reader will be adopted both by merchants who were using a competitor’s device as well as sellers who previously only accepted cash payments for physical-world sales.

The new product launch comes with some big questions, though. The reader only accepts payments made with traditional magnetic stripe credit cards at a time when banks are issuing a new type of credit card that’s embedded with a computer chip and is less susceptible to fraud. Big retailers are installing equipment to accept these new chip payment cards.

This is all happening because starting in October 2015, liability for card fraud will sit with whichever entity — the card issuer or the merchant — is using the less secure equipment. And in light of the string of data breaches at Target, Home Depot and Michaels, neither side wants to take that risk.

Square has said it will start selling a reader early next year that is compatible with chip cards. Amazon does not make a device that accepts chip cards. PayPal does, but doesn’t currently sell it in the U.S.

Etsy’s reader also can’t accept mobile payments like Apple Pay and Google Wallet.

Velasquez says Etsy doesn’t believe these technologies are top of mind for most of its sellers right now, but says it is monitoring their traction.

“When we see there is a tipping point,” she said, “we will act accordingly.”

This article originally appeared on Recode.net.

Sign up for the newsletter Sign up for The Weeds

Get our essential policy newsletter delivered Fridays.