Different processors will offer a variety of different equipment and software options, allowing you to facilitate transactions that are either card-present or card-not-present.
Before you sign a contract, ensure they have the tools that your business will need to accept payments, however, and wherever you need to. In addition to how you want to accept payments, take note of any software integrations or requirements that would help your business, and confirm with your selected payment processor that they will be able to provide the functionality you're expecting.
Solutions for Card-Present Transactions
As payment methods and hardware technology continue to evolve, new payment devices continue to be introduced to the marketplace to allow you to accept payments in person. Each piece of hardware is unique and will vary on which payment methods they support. These methods include magstripe swipe, Chip, Chip & PIN, and tap (NFC). Their available connectivity also varies, such as Ethernet, Wi-Fi, Bluetooth, audio jack, 3G, among others. Merchants are not short on hardware options, and each component needs to be carefully selected based on your business needs.
Credit and Debit Terminals
If you are accepting payments in person, then you will need to decide which terminal is right for your business. There are a variety of wired and wireless terminals available to choose from that will allow you to quickly and easily accept payments in person.
What makes a terminal different from mobile readers is that they don't need to be connected to a computer or paired with a device (such as a phone or tablet). These terminals can operate in a stand-alone environment as long as they have internet or phone-line connectivity. This means that a merchant can easily add a terminal to their store's countertop and simply accept payments. The frequent downside of terminals is their lack of software and functionality, they typically only offer basic payment functionality and lack any "smarts" or data-driven insights that a true Point-of-Sale system would provide.
Card readers, unlike terminals, typically rely on another device that they need to pair with for connectivity and to be able to initialize transactions. These devices can include phones, tablets, Macs, PCs, and other workstations. While this dependency may be seen as a disadvantage, there are also numerous benefits to using a card reader.
- MOBILITY "“ By pairing with phones and using their data, card readers allow for easy on-the-go payment acceptance.
- LOWER COST "“ Since they are dependant on another device to provide some of their functionality, card reader hardware is relatively simple compared to other hardware options meaning it can often be priced lower than terminals. There is also the added savings of not having to outfit your long-range terminal with a SIM card and paying monthly for separate data.
- SCALABILITY "“ Merchants that have numerous locations or large teams of people spread out over multiple locations often choose to accept payments by purchasing a large number of card readers at a lower cost than individual terminals.
- SMART DATA "“ Pairing with smartphones and computers gives mobile readers the ability to allow payments to flow through more sophisticated apps and Point-of-Sale systems than typical stand-alone terminals which can centralize and your data and provide valuable sales insights. The original card readers had limited connectivity options and were only able to connect with mobile phone audio jacks and only able to accept magstripe transactions. However, new card readers continue to be introduced with more connectivity and payment method options, blurring the lines between readers and terminals and redefining merchants' hardware requirements.
In-Store Point-of-Sale System
If you are interacting directly with customers, then you will most likely need a Point-of-Sale (POS) system for your business. The traditional POS option is the standard cash register that you grew up with, however, new technologies in software and data collection mean that business owners have a wide variety of modern options to choose from today. Cloud-based POS software has made POS systems accessible for small businesses and they are able to completely replace the functionality of a cash register while increasing efficiency, lowering costs, and saving space. To use a mobile POS, you just need to download the application on your mobile device, tablet, or desktop and you can begin processing immediately.
Understanding Chip Cards
While on the topic of credit card readers and terminals, let's take a quick look at chip cards or EMV-enabled cards.
EMV stands for EuroPay Mastercard Visa, after the three original companies that developed the standard. EMV was introduced in Europe in 2006, in Canada in 2010, and in the US in 2015. Interac Debit, which applies to Canadian merchants only, also changed over to the EMV standard in 2010.
EMV is often referred to as Chip & Pin because the most common way to use an EMV-enabled card is to insert the chip and then enter your personal PIN code. However, this is an oversimplification of the EMV standard, which also encompasses other transaction modes such as "Chip & Signature," where customers enter a card into a terminal and then sign instead of adding a PIN, as well as "Tap & Pay," where customers tap a chip card or phone against the terminal to pay.
Using EMV to Reduce Liability
While EMV has not completely replaced swipe for credit card transactions, if you choose to swipe credit cards instead of using EMV-enabled hardware, due to the recent liability shift, you are exposing your business to the risk of fraudulent transactions.
Card-Present vs. Keyed
To accept an EMV transaction all you need to do is use a terminal machine that supports EMV chip card transactions. When customers are ready to pay for their purchases, they simply use an EMV chip-enabled card. If a customer does not have an EMV chip card, it is up to you if you'd like to accept their card "“ and potentially open yourself up to unnecessary risk "“ or ask for an alternate form of payment.
EMV technology does not impact card-not-present (ecommerce or manually keyed) transactions as it only deals with card-present (retail) transactions. The requirements for manually keyed-in transactions have not changed, so they have not yet been impacted by EMV chip card technology.
Near Field Communication
NFC (or Near-Field Communication) is a technology used in a multitude of contexts from product scanners and key fobs to file sharing and children's toys. If a credit card, debit card, smartphone, or wearable device is NFC-enabled, then they are able to pay for a purchase by simply holding their card or device close to the terminal, essentially facilitating contactless payments.
Even though the card or device needs to be within about an inch and half of the terminal in order for the communication to occur, NFC payments are also commonly referred to as "Tap & Pay," "Tap & Go," or simply "Tap," because the user can simply tap their card or device on the terminal's surface to complete the transaction. Mobile and wearable payment technology, such as Apple Pay and Android Pay, also rely on NFC technology to complete transactions.
Solutions for Card-Not-Present (Online) Transactions
A virtual terminal allows you to accept payments on your computer from anywhere, without the card being present. You simply log in to your workstation, laptop, tablet, or phone and authorize credit card transactions in real-time, all you need to complete the transaction is the credit card information from the cardholder.
If you have an existing website that you need to add payment functionality to, then a hosted payment page might be the solution. Using a hosted payment page is an easy and secure way to accept payments online, save credit card information for recurring payments, and add a full shopping-cart checkout system to your website.
A payment gateway (sometimes referred to as a payment API or RESTful API) is a specific URL that has no user interface but is designed to receive an incoming transaction message. While most payment processors offer some type of payment gateway API built-into their service, some companies such as Authorize.NET and Cyber-Source are referred to as "payment gateway-only" service providers. This means that they offer their payment gateway service without a merchant account.
So why would you pay for a payment gateway-only service? Listed below are some instances that require it.
COMPATIBILITY "“ The software or shopping cart you are using is not compatible with your processor's payment gateway but is compatible with a payment gateway-only service. This is a common usage of Authorize.NET, which is the most commonly integrated payment gateway. MERCHANT ACCOUNT PROVIDER ONLY "“ The provider does not have their own payment gateway. These merchant account providers will rely on reselling third-party payment gateways instead of developing their own payment gateway. ADVANCED FEATURES "“ The built-in payment gateway offered by your credit card processor does not have all the features you need. Some payment gateway-only service providers offer features such as card-tokenization and advanced fraud-protection that are beyond the scope of what most regular payment gateways offer.
The main downside of using a payment gateway-only service is that you would incur fees from both the credit card processor and the payment gateway company. However, for some, the benefits of the seamless payment integration warrant the additional costs.
Because payment gateways work with your merchant account to allow you to process payments for customers, most credit card processors will provide both services to your business. While it is possible to find a payment gateway that only offers payment processing, most processors will offer additional services like payment notifications, checkout pages, subscription management, and credit card vaults. Having the same provider supplying your merchant account and payment gateway along with all the additional functionality your business needs can simplify your business processes and make it easier to troubleshoot issues if they arise because it is the same company providing all the services.
Third-Party Software Integrations
Many payment processors include the ability to add third-party shopping carts and payments to the applications that your business is already using. Integration capability will vary by the processor so it's worth confirming which integrations they offer to confirm they can support the applications that your business is currently using.
As the landscape of payment processing changes and evolves, so too do expectations for what a payment processor should provide. More and more, payment processors are packaging business software tools like invoicing, customer relationship management (CRM), recurring billing, inventory management, and others along with their offering, usually as paid value add-ons. Most processors partner with a software provider, but some develop their own proprietary software solutions to offer their merchants. It's worth asking your processor what kind of software they are offering along with their processing and if they charge for it.
How Do You Decide What Your Business Needs
When you're evaluating different payment processors to decide what equipment and software you'll need, it can be helpful to list all the ways you want to be able to accept payments including how your customers like to pay in-person and if you would like to be able to take payments over the phone, send invoices, or use a website to accept payments. Once you have a comprehensive list of the different payment methods you would like, compare the list with the solutions offered by different payment providers.
Your specific needs might not be a fit for just one solution, maybe you'll need to use integrations, or find a different provider for different tools. But having a list of all of your must-have needs and nice to have tools will help you evaluate your different options.
Get the Merchant's Guide to Credit Card Processing
We hope you found this information helpful, you're now well on your way to better understanding the payments industry. We created this guide to help businesses that were looking to accept payments for the first time, or who are frustrated by a lack of resources for the payments industry. If you want to download the complete Understanding Payments guide, you can do so here.