One way — and the most traditional way — to process consumer payments is to accept them in your brick and mortar store. Many people remember the carbon copy transaction machines, as merchants ran your Mastercard or Visa through a knuckle buster manually. Today, accepting card payments is much different than even five years ago.
In standard credit card processing, there are typically five players: the seller, the buyer, the issuing bank, a merchant account, and the credit card processing company. For example: You’re a merchant selling the product or service to the customer, who pays you with either a credit or debit card. The issuing bank is the bank or financial institution that issued the credit or debit card to the buyer, such as Chase Bank. The merchant account is a type of bank account owned by you, the merchant, allowing you to accept card payments. Finally, in this cast of characters, is the credit card processing company, your partner to process the card payments.
For online stores, you’ll need to add one more player: a payment gateway. The payment gateway allows you to receive secure approval or denial of the transaction over the internet. Brick-and-mortar stores don’t require this gateway. However, if you have a physical location and would like to add an online store, the payment gateway is a must-have for payment processing.
The impact of technology on credit card processing?
Today, technology is disrupting all sorts of industries and payments are no exception. Like it or not, we’re well into the Fourth Industrial Revolution, where artificial intelligence (AI), robotics, blockchain, and the Internet of Things (IoT) are driving the economy forward. Our society is experiencing a type of perfect storm, where these technologies will not only change how we live, work, shop, and play, they will also radically transform our day-to-day activities.
2018 Federal Reserve Payments Study, in 2017, total credit card payments increased by 11.3 to 123.5 billion.
Remote payments continued to multiply, as indicated by the Federal Reserve study, showing a 22.8% increase from 2016 to 2017, compared to a growth rate of 7.2% for in-person payments. Additionally, chip-authenticated payments increased substantially, showing a rise of 41.6% in use in 2017. Also, with smartwatch sales rising 56% in the fourth quarter of 2018 alone, contributing to the record-breaking 45 million transactions during 2018, you can bet wearable payment methods are going to become commonplace.
With technology continually expanding consumer shopping options, understanding how credit card processing can benefit your business is mission-critical. Let’s dive into the world of credit card processing.
The types of credit card processing.
Let’s focus on three types of credit card processing options that are making waves. We’re all familiar with traditional forms of credit card processing, like swiping a card through a machine. Now, however, new credit and debit card technology has emerged, focusing on additional security as well as convenience. Let’s look further at EMV chip card, NFC contactless, and wearable payment technology. EMV payments — or chip card payments — allow consumers to insert their card into the chip reader terminal, removing the need to swipe the card’s magnetic strip. Near field communication (NFC) is a contactless payment method, allowing communication between the payment terminal and smartphones, tablets, or smartwatches. NFC technology allows for the exchange of encrypted payment information without physical touch. The consumer simply waives the card or smart device over the payment terminal and the purchase is completed securely.
Consumers often use NFC contactless technology during mobile payments and when using electronic wallets, such as Chase Pay or Apple Pay. According to Business.com, millennials are 2.5 times more likely to adopt technology earlier than older generations, as evidenced by almost 50% of millennials preferring mobile payments. With millennials responsible for more than $600 million in annual spending, watch for more common uses of these payment technologies over the next few years.
Wearable payment methods, such as those through Apple Watch, are also increasing. Although more than 60% of Americans disfavor a cashless society, this technology is more popular with younger generations. For example, in 2018, at least one-third of (23.8 million) US millennials used a wearable device at least once per month. That number is expected to increase to 28.9 million US millennials by 2022.
Creating payment options that benefit your buyers will inevitably help you grow and expand your business. By finding a credit card processing company to partner with you, you can adapt needed payment technology without feeling like you’re alone on a desert island.
Is credit card processing secure?
Although online and mobile payments allow for more convenience and flexibility, with the rise of credit and debit card use, fraud and theft increases as well. For example, in 2018, credit card fraud hovered around $6.4 billion, which includes not just the skimming credit card numbers but also identity theft.
So, how can merchants keep their customers’ financial data secure? First, make sure that your processing system is PCI-compliant. In 2004, the major credit card companies, including Mastercard, Visa, and American Express, created the Payment Card Industry Security Council (PCI SSC), which in turn established the Payment Card Industry Data Security Standards (PCI-DSS). These security standards include rules on fraud prevention, chargebacks, and identity theft — helping merchants keep their customers’ payment information secure. Adherence to these standards is required for any business offering credit or debit card payments.
Additionally, take other security measures as well, such as using a processing company that encrypts financial data. Address verification is another form of security, where the processing system confirms the cardholder’s billing address with the issuing bank, adding yet another layer of protection.
Finally, don’t underestimate the power of training and education. By training your team on using good security measures, you can proactively prevent fraud and theft by learning how to guard against such occurrences continually.
Selecting a credit card processing provider.
Offering a secure credit card processing system is critical to the success of your business. By teaming up with an experienced, reputable ecommerce partner, you can be confident that you’re offering your customers convenient, flexible, and secure payments, boosting your reputation as well as your customers’ experience.
When searching for a credit card processing provider, be sure to ask the following questions:
- What types of payments do you accept?
- What are your fees? Are there start-up fees? Monthly fees? Per transaction fees? Early termination fees?
- What equipment is needed? If, for example, you operate an online store, your set-up may be different than that you’d want for a brick-and-mortar location.
- Do you offer 24/7 customer service? What about training?
- Does the payment processing system integrate with your other technological platforms, such as inventory and bookkeeping software?
- Do you provide reports on our sales, giving us insights into our business?
- Do you offer additional services that will help us grow?
At North, we partner with merchants of all types and sizes, to help them grow their businesses. We make it easy to get set up for payment processing in your brick-and-mortar or online store. We have the technology you need to adapt to consumer behaviors by accepting payments in the modern world, providing you with the latest solutions, highly competitive pricing, and seamless integration. We’ll help you tailor your payment processing system to your specific business, then we’ll back it up with U.S.-based customer care and technical support — available day or night to give you peace of mind. To set up a consultation, contact us here or give us a call at 877.840.1952.
