Insight on POS Solution Selection for Independent Merchants
POS and Integrated Payment Processing
Paper or Plastic? Payment Processing Considerations from an Objective Source
Chances are you are not carrying as much cash as you did in the past. You are not alone. According to the Federal Reserve Bank of Boston, there were some 176.8 Million Card Holders in 2010. Further, the average cardholder carries 3.5 cards. 80% of all consumers carry a debit card. Approximately 60% of all consumers have a rewards card of some kind. That is a lot of plastic!
Many factors contribute to the paper VS plastic ratios in the payments world including convenience, loyalty point and rewards programs, speed of check-out, security, etc. So, as a merchant, it is absolutely necessary in this day and age to accept as many forms of payment as possible. Hence, you need to select a merchant service provider. So, what are the things you should consider? Where do you begin?
I have never been in the business of payment processing. However, spending the last thirteen years of my career in the point-of-sale software business, I have learned quite a bit about the payment processing industry. To provide a complete POS solution, we must be able to provide payment processing options that are seamlessly integrated with our software. Consequently, I have spent a great deal of time working with companies in the payments industry and learning how it all works.
The world of payment processing is complex for a number of reasons. Security and fraud protection is key. There are lots of people involved and lots of technology that comes into play with each and every transaction. You most likely receive calls from payment processing companies several times a week. They want your business and they promise differentiators from the last 500 companies that called you. All you want is to accept credit cards and pay the lowest rate possible. Right? So, what other considerations are there?
Here are a few pointers from a semi-educated and unbiased point of view:
1. Eliminate as many layers as possible. There can be lots of layers in payment processing. There are ISO’s, gateways, software companies, processors, acquiring banks, card issuers, etc. With each layer comes potential points of failure and often times additional costs. So, focus on buying direct as much as you can. Sometimes, bigger is better. This may be one of those times.
2. Be sure that your payment processing selection is compatible with your POS software and hardware. Many of these providers use proprietary systems and devices that may or may not work with your POS. If the payment processing is not fully integrated, you could spend hours on reconciliation each day and significantly decrease your speed of service.
3. Seek clear and concise pricing models and transparent merchant account statements. If the company does not provide full transparency, it is difficult to decipher what you are actually paying to process transactions. That is typically by design and means there are hidden fees along the way. Ask for “interchange plus” pricing.
4. Avoid long-term contracts and cancellation fees. In today’s climate, you never know what tomorrow brings. New security standards are just around every bend. Less expensive options may be as well. You might switch your business model or upgrade your POS system. Who knows? It is best to be free of long-term obligations with payment processors just in case changes occur.
The acceptance of electronic payments can be expensive. However, I have a customer who has a much different view. This customer has a goal to go 100% plastic in the very near future. He loves accepting credit cards for a few reasons:
1. With 1-second approvals, it is faster than cash.
2. His employees and managers spend several hours a week reconciling cash drawers.
3. He sends employees to the bank in the inner city several times a week with large amounts of cash.
In his mind, electronic payments are the way to go. They speed up service, free up employees to take care of customers and decrease his liability with the banking issue. When I asked him what he planned to do when cash-carrying customers grew angry over the new cashless system, his answer was a great one. He said that it would only happen once. He would pay for their lunch and gain a customer for life.