Card swipe dongle or NFC? Erply chooses both

Erply, a point of sale and inventory software provider from Estonia, has been growing quickly, racking up 20,000 retail customers, including 8,000 who are using iPads (s aapl) hooked into point of sale terminals. Now the company is looking to jump into the ring with Square and Verifone (s pay) by offering an iPad payment dongle that will process credit card swipes similar to Square but also handle near field communication (NFC) payments.

The NFC angle is a little gimmicky right now, considering there are few ways to pay with NFC-enabled phones. But it shows that Erply isn’t just poised to be a me-too product but is looking to the future, when NFC payments become more prevalent. But the real benefit will be in tying a dongle into Erply’s cloud POS and inventory software, which allows merchants to get a real-time view of inventory and payments as they come in from multiple terminals and locations. That will be useful for small- and medium-sized businesses with more than one location. Employees will be able to process transactions from the sales floor, and they’ll be able to check on back-room inventory right from their iPads to help customers.

“With our mobile credit card reader, we are providing retailers with the full range of technology options they will need to accept and process payments and make real-time decisions that affect their business,” said Erply CEO Kris Hiiemaa.

Another selling point for Erply is its payment processing fees, which will hit about 1.9 percent, lower than Square’s 2.75 percent. Erply is able to do this because the device encrypts the card data and transmits it directly to the POS software to process the transaction and record the sale in inventory. Because there’s less chance for a merchant or a criminal to steal the card data, that allows Erply to lower the risk margin, which means lower fees. Erply doesn’t process the actual payment, but works with about 25 payment providers, who are able to process payments in a day.

Erply’s dongle comes with a price of $50, compared to Square’s free swiper, and companies can expect to pay $70 or more for Erply’s software. Customers with one iPad can get a free package. IPhone support will come within the next three months. Erply won’t necessarily appeal to a lot of Square’s business customers, who are often small merchants with one location. But it’s another choice for small- and medium-sized businesses and allows them to go mobile with payments inside their store.

There’s still a lot of room for competition in this mobile payment space, and Square is finding there are plenty of companies looking to cash in by helping merchants accept payments. Erply’s move to process payments on mobile devices may do more to coax some merchants into mobile payments than siphon away business from Square, which also improved its iOS apps and redesigned its website this week.

And it should keep Erply growing at a fast rate. Erply, which is now processing $2.5 million in transactions a day, won the Seedcamp funding competition in London in 2009 and has been steadily stealing away customers from larger firms like Microsoft (s msft) and SAP(s sap). It recently just signed its first Fortune 500 customer, and about 40 percent of its clients are in the U.S. In March, Erply raised $2 million from Redpoint Ventures, Index Ventures and a bunch of angels including Dave McClure.