Nab virtual merchant 2Shopping today is different than it was even ten years ago. Rarely do you ever see someone pull out their checkbook at the grocery store and if they do, your patience probably goes through the roof. Today, consumers (well, most consumers) want quick, seamless, and secure ways to purchase goods and services. With several types of payments now available, such as credit and debit cards, e-wallets, mobile payments, and online payments, the ball is definitely in the court of consumers when it comes to choosing how they want to pay.

In a recent study, Business Insider projected that ecommerce would exceed $1 trillion by 2023, representing close to a fifth of U.S. retail. Additionally, mobile payment services such as Venmo, PayPal, or Square Cash are expected to rake in $574 billion in transactions by 2023. With these types of payments surging, as a business owner, you need to know how to keep up with the trends and the demand for easier payment processing. Here are our top four tips on payment processing.

Learning the lingo.

In our first tip, let’s look at some of the lingo in the payment processing industry. To accept customer payments such as credit or debit cards, you need to purchase a payment processing system. Reviewing different processing providers can be difficult if you don’t have a basic grasp of the industry’s language. Let’s look at some key terms you should understand.

A merchant.

A merchant is someone who sells goods or services either in a brick and mortar store or on the internet. To accept digital payments, a merchant must have a “merchant account.” A business owner uses a merchant account to process payments. A merchant account is similar to a checking account. When a business owner uses a merchant account, he or she is verifying that it’s his or her account and the account can accept funds from purchasers.

Merchant accounts can accept a consumer’s credit or debit card whether it is present or not. Cards that are present can be run through a magstripe reader or dipped in an EMV “chip card” reader. If the credit or debit card isn’t present, the merchant can key the card information into the system. Additionally, merchant accounts are subject to fees, charged per transaction or once per month.

Payment gateway.

Think of a payment gateway like your telephone line or cable wires. When a customer buys an item from your store, the business owner runs the credit card, for example, through a payment processor to the merchant’s bank through a payment gateway. The issuing bank is the financial institution that granted the credit or debit card, such as Chase Bank. Instead of telephone or cable wires, a payment gateway is software that communicates the payment information to the bank. The business owner then knows within seconds whether the payment is approved or declined.

Only ecommerce merchants need an online payment gateway. Brick and mortar stores do not. However, if you’re a traditional merchant with a storefront and you want to add an online store, or if you want to integrate your sales with an inventory system, then you’ll need to put adding either a payment gateway or virtual terminal atop your to-do list.

Understanding the payment process.

So, how does the payment information travel through the gateway? As stated above, payment gateways communicate the customer’s payment credit or debit card information to the issuing bank. Because you’re transmitting sensitive financial information, security needs to be a top priority, not only to keep your customer’s financial information safe but also to preserve your reputation as a rock-solid merchant.

Since security is paramount, submitting payment information occurs over the HTTPS protocol, allowing information to travel securely. Further, anyone having access to credit or debit card information must comply with the Payment Card Industry Data Security Standards (PCI-DSS), which was created by the major credit card providers, such as Mastercard, Visa, and American Express. PCI standards include rules on fraud prevention, identity theft, and chargebacks.

To secure a purchase approval or denial, an authorization request is sent to the merchant’s bank, which then determines the customer’s issuing bank on the credit or debit card. Once identified, the issuing bank is notified about the purchase and determines if the customer can make the purchase based on his or her bank balance or available credit. If the issuing bank approves the purchase, then that bank places a hold on the customer’s account. Believe it or not, all of this happens in a matter of seconds.Nab virtual merchant 1

Determine the types of payment processing you need.

Depending on your business, you may choose only to offer credit or debit card processing, or you may prefer to also offer echeck (ACH) or mobile wallet acceptance.  Let’s look at these different payment methods in more detail.

Credit card processing.

Credit cards have been around for decades. However, their use over the past several years has skyrocketed. Like debit cards, it’s easier to swipe your card than write a check or carry around cash. Say what you will about the credit card debt crisis, that’s a post for another day. If you’re a merchant and you don’t offer credit card payments, you’re missing out on significant business.

Debit card processing.

Debit card purchases have also grown in popularity over the past several years, in many cases, pushing credit card use to a distant second. Debit cards are also easier to process than their credit card cousins. Because debit cards are tied to the customer’s bank account, only that bank needs to be contacted. If the buyer has sufficient funds in his or her bank, then the transaction will be approved. Because available credit isn’t being checked, debit card processing fees are generally lower than those associated with credit cards.

E-Check (or ACH) processing.

Echeck or ACH payments still rank high above paper checks, in that you don’t have to wait for a check to arrive in the mail or make a trip to the bank to make a deposit.

Overall, echecks are safer than paper checks, with less chance of fraud. However, processing an echeck isn’t free. Depending on how you approach checks, you may need a scanner that will convert the paper checks into digital payments.

If you choose ACH payment processing, you typically need to share your bank information with the purchaser so that they can electronically send funds directly to your account. Additionally, you may pay processing fees per check or per transaction, although these fees are typically lower than those associated with credit cards.

Ewallet processing

Ewallet processing is synonymous with the digital wallet, such as Apple Pay. These types of payments use near-field communication (for NFC contactless payments like Apple Pay), which are mostly short-range radios. If payment is made via a smartphone or smartwatch, then the short-range broadcast from the phone or watch transmits payment information to your terminal.

Although this is a newer technology, depending on your customer base, you may want to consider offering this payment method. With younger generations controlling more and more purchase power, there’s no doubt this new technology will become more widespread.

What to look for when hiring a payments partner.

At NAB, we can help guide you through the setup of your payment processing for your brick and mortar store, for online or mobile acceptance, or for all of the above. We have the technology you need to adapt to consumer behaviors by accepting payments in the modern world, providing you with seamless integration and low fees. We’ll help you tailor your payment processing system to your specific business, giving you peace of mind. To set up a consultation, contact us here or give us a call at 877.840.1952.

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