Important Payment Processing Concepts to Understand

In order to start processing payments, you’ll need to have specific tools and systems in place. A point of sale, payment processor, merchant account and payment terminal are the systems and terms you need to be familiar with before embarking on your journey. 

Point of Sale System

A point of sale (POS) system is the software you use to run your retail business—ring up sales, accept payments, manage inventory, run reports and more. If you don’t already have a POS system, it’s important that you get familiar with the key features to look for in one. 

Payment Processor

Your POS helps you manage your store and enables you to accept payments. A payment processor is what allows you to process those payments (beyond cash). Your POS and your payments processor may or may not be integrated—more on that later. 

Merchant Account 

In short, a merchant account is a bank account that will allow you to accept credit (and debit) card payments. 

Note: depending on your choice of payment processor, you may not need to worry about managing your own merchant account. 

Payment Terminal

A payment terminal is the hardware that enables you to process payments by debit or credit card, and now by virtual wallets. 

Make sure that whatever terminal you install is compatible with your payment processor. For security purposes, you should order hardware directly from your processor if you can.

Another thing to consider is contactless payments. In the wake of COVID-19, minimizing points of contact in your store have become critical. It's important to consider options that allow you to accept payments from Apple Pay, Google Pay, Samsung pay and credit or debit cards with the contactless, tap to pay option.

Important Payment Processing Concepts to Understand

Picking your payment processor is a crucial step toward retail success. Don’t rush it—always be sure you fully understand what you’re signing on for and that you’re getting the fee structure and features that will work best for your business. 

Integrated vs Non-Integrated Payments

Integrated payments means your terminal communicates directly with your POS, while non-integrated payments is the opposite.

Some retailers may prefer unintegrated payments, but as a rule, integrated payments is more convenient and significantly reduces the risk of fraud and manual entry errors. Plus, an integrated payment processing solution saves you time at checkout, during your end-of-day close and is much simpler to manage. 

Unintegrated payments may mean that you can keep taking payments if your POS goes down, but the amount of work and time needed to keep an unintegrated system running smoothly is rarely worth it.

Pricing Models

Choosing your payment processor also means choosing from a myriad of different pricing models. Understanding what each of them entails and the types of fees you’ll be charged will give you a clearer idea of what your bill will look like month-to-month. 

Flat Rate

Flat Rate is a predictable, one-rate pricing model where you know that every time someone uses their credit card to make a payment, you’ll pay a specific fee for card-present (CP) transactions, or a specific fee for card-not-present (CNP) transactions. 

Interchange Plus 

An Interchange Plus pricing model does things a little differently. Credit card companies like Visa and Mastercard charge merchant account and financial service providers and those fees are then passed on to retailers who sign up with the payment processor. Your month-to-month bill can vary, as your interchange fees can change depending on the cards used to make purchases in your store.

Tiered Pricing

Tiered pricing is another model you might see. With tiered payment processing, all transactions you take are sorted into one of three tiers: either qualified, mid-qualified or non-qualified. Typically, merchants sign up for tiered pricing expecting most of their transactions to be processed with the favorable qualified rate.

Surcharging

At National Merchant Advisors we offer two different compliant surcharge programs. With a compliant Surcharge program like Payroc’s RewardPayTM Program, a merchant can substantially reduce its overall card processing costs by 60% to 90%, eliminating its cost of accepting credit cards. 

We actually offer two different types of surcharge programs:

RewardsPay - With this program all costs go to the cardholder (Credit Card only),

RewardsPay Choice - With this program costs are split based on the merchant's guidance.

PCI Compliance

With processing power, comes security responsibilities. If you want to start taking credit cards, you also have to ensure you stay compliant with security measures. The PCI SSC—Payment Card Industry Security Standard Council—outlines minimum requirements for PCI compliance. 

Getting up to speed on PCI requirements is important because you could be in for some costly fines if you don’t.

Choose the Right Payments Solution for You 

Here at National Merchant Advisors, we have the ability to custom fit a payment processing solution to meet the specific needs of each type of business. Click here to schedule a call with one of our experts and allow us to help guide you to the best, most cost effective solution for your business.

Credit: Alix Fraser