Choosing the right vendor to process your credit cards bears directly on your overhead costs, given the many transactions and related fees. Your goal is to keep as much of your sales as possible while easing the transactions for clients. Below are some recent trends in credit card processing:
Making money is good. Having it in-hand is better. So many processors are working to get merchants their money quicker. “Operating capital is very important to any operator,” says Jeff Brodsly, president and CEO of Chosen Payments, a credit card processing company. “So if they have a busy Friday or Saturday and have their money on Monday to make payroll, it makes a huge difference. That’s one of the biggest trends that this industry needed and where I’m having a lot of success.”
While many merchants are used to getting their funds in two days for Visa and Mastercard, and three to five days for American Express, some operators may get their funds faster. Be aware that several factors determine funding times. Most important is your “batch out time” — or whenever you close your business day and send your daily transactions to the bank. “You have to do it by a certain time to get next day funding,” says Matt Rogers, relationship manager at Century Business Solutions. “We can set that up. It just depends on the individual, what software they’re using, etc.”
In other words, don’t expect to batch out on Saturday at 10 p.m. and get that day’s earnings on Monday morning. The requirements for next day funding are the same for everybody, although, next day funding may not be a good fit for some business models. “There’s a misconception that some credit card processors can get next day processing and others can’t,” Rogers says.
Mobile Payments Option
With the growing use of smartphones and tablets, mobile, point-of-sale credit card processing is near universal. This technology allows chauffeurs to take payment in the vehicle by swiping a card reader that plugs into a mobile device. “It’s not built for all operators but it’s built for some and having that technology communicate with their backend software system is something the industry needs more of,” Brodsly says.
One benefit of mobile processing is that it can reduce fraud since the physical card is in hand. Any credit card purchase over the phone has a greater chance of fraud, which also means a company will get a better rate for that transaction than keying it in over the phone. Brodsly estimates you could see a .4% to 1% better rate for physical swipes. There is also a cosmetic appeal to pulling out an iPad or iPhone to process a credit card, he says.
Is Flatter Better?
Well, that’s your call, but people tend to want a flat rate fee because it appears to be simpler. There’s a good deal of confusion over this, Brodsly says. Here’s what you need to know.
Jeff Brodsly is the president and CEO of credit card processing company, Chosen Payments
Companies that offer flat rates are aggregating all the varying rates for many different types of transactions for all their merchants to offer a simple flat rate to everyone. Visa and Mastercard dictates those varying rates — called interchange rates — which are non-negotiable and are public information. There are hundreds of different rates for corporate cards, debit cards, rewards cards, etc., as well as the type of transaction, card-present versus keying in the info.
So it’s not as if the flat-rate company has access to different rates, it’s that they bundle them to make a simpler offer. For example, Square offers 2.75% for swiped transactions or 3.5% plus 15¢ for manually-entered transactions.
A non-flat rate pricing system will have monthly statements that are broken down by each transaction so clients can better understand their rates. And you can still figure out your effective rate, which is calculated by dividing total processing fees by total sales volume. Compare that to those flat rate offers and see where you end up.
Payment Card Industry (PCI) Compliance
In a nutshell, PCI compliance is a set of rules and regulations set forth by the card brands (Visa, Mastercard, Discover, American Express). These are the best practices of accepting credit cards established with the goal of reducing fraud. To assess compliance, businesses are required once per year to complete a self-assessment questionnaire (SAQ) about their business practices. “The purpose is to make sure the business is operating with the least amount of risk for fraud and data breach,” Brodsly says. “If not, you’re going to start getting fined by your processor every month until you’re PCI compliant.”
A good processor will help merchants be compliant and walk you through the questionnaire if needed. They should want their portfolio to be compliant, because if one merchant takes a loss it could affect everyone downstream. “We make absolutely sure that no one is housing any credit card data on their server… and there’s no liability on any operator,” Rogers says.
One of the big risks that compliance attempts to minimize is that of data breaches of company servers, Brodsly says. “If an operator has 4,000 clients in their software system of credit card information, if a hacker gets into that and gets all of that, that’s serious stuff. That could put someone out of business. That could be $2 million, $3 million worth of damages. Our job is to educate merchants so they practice safely and make sure they’re not susceptible to these data breaches.”
Some processors can offer more efficient processing by integrating with the leading limo software platforms. Here’s a common scenario: Although an operator has his own reservation software, he must run the transaction through a physical terminal, and then go back to the reservation software and re-enter the information and apply it to the reservation to show it as paid. Ideally, this would all take place within the software. “We can provide integrated solutions so merchants can run credit card transactions directly in their software,” Rogers says.