How to choose an in-person payment system
Although the world has steadily moved towards ecommerce and newer contactless technologies and smartphone-based apps like Apple and Google Pay, the reality is that in-person payments are the foundation of payments technology, going all the way back to the days of physically imprinting numbers on carbon copy receipts. And even though the COVID-19 pandemic will likely continue to accelerate this change, card present is still the majority transaction channel for card payments.
With several options on the market, it is critical that platforms choose the right integrated card present provider. This article looks at the factors to consider in choosing your next card present solution.
What is a Card Present transaction?
A card present transaction is one in which customers swipe, dip or tap credit/debit cards at physical storefronts. As a result, in-person payments are almost always classified as card present transactions, even if the card itself isn’t physically present. For example, Apple Pay transactions are considered card present even though the card is loaded on a device and the card may not be physically present. For many merchants and platforms, card present is a necessity because their business model involves in-person transactions, but for others it is an addition or extension to an online model.
What are the additional benefits of offering a Card Present Solution?
For a business that is currently online only, the benefits are obviously centered on adding in-person payments. But there are benefits that can accrue to other businesses. Today the buyer journey across various sales channels is merging. It is important to offer a consistent experience across in-person or online sales channels while considering the other benefits below.
Lower-processing fee: With the physical presence of a credit card and its owner during a transaction, fraud risk is low and in most cases the fees for these transactions are also reduced, commensurate with the lower risk.
Activate payments across sales channels (in-person or online): Person-to-person payments extend existing card not present business by allowing for more opportunities. For example, an event business that sells tickets online can extend to in-person payments, by adding a card present solution at the door. The reverse is also true: A restaurant can add curbside pick-up service via online ordering using an online or card not present solution.
Convenient and faster checkout experience: Consumers are looking for faster checkout experiences with minimal interaction. Person-to-person payments, specifically contactless, enable speedy checkouts, saving your merchants and their consumers time; not to mention the ability to engage in a transaction without contacting another device and risk transmitting germs.
What do you need to know to make smart card present decisions?
Integration and control of merchant experience: How thoroughly and well you can integrate the payment solution into your own software via APIs is an important factor. For example, can the solution easily handle complicated tipping situations? You might want to have tipping disabled or set at a lower default for a curbside pickup option, but enabled at a higher default rate or as mandatory for a fine dining situation. The flexibility to tie into your own software in detail and across a wide variety of circumstances will greatly improve your success with your payment solution.
Flexible fulfillment options: You may want to have full control over device and terminal fulfillment and manage the distribution of devices to your customers yourself, or you might want a fully turnkey fulfillment solution that handles all the details and manages shipping, etc. with little to no input from you.
Ease of use: This is a consideration beyond just the hardware, but also of the controlling software and how well the card present solution integrates with the other software and hardware systems that may already be in place. For many verticals, such as retail or restaurants, ease-of-use can be of prime importance; there may be little time to train staff and high turnover in staffing means that the need for more or less training can have a significant impact
Comprehensiveness of supported payment types: You will want a solution that can handle most common payment types including NFC, chip, magnetic stripe, contactless or mobile wallets such as Apple Pay or Google Pay. To learn more about different technologies, refer to the glossary at the end of this post.
Reliability: It is important that hardware, software and network systems, both local and to the payment gateway and banks, all remain operational. Downtime can be incredibly costly for many businesses.
Security: Although EMV and NFC are much more secure than previous technologies, legacy magnetic stripe is still used in large volume - and is relatively easy to counterfeit since the tech needed to copy magnetic stripe cards is widely available. It is also very easy for fraudsters to get card data via skimmers. EMV prevents this from happening by encrypting and dynamically updating credentials so that counterfeiting is costly and ineffective.
Resilience and failover management: Another challenge for card present solutions is failover. In the case of a hardware, software, or communications failure to successfully transfer card data, what solution is there? An obvious example is dropping back to magnetic stripe if a chip reader fails. But procedures need to be automatic and, even better, adaptive by reminding both parties to follow any changed security or information gathering. Typical solutions involve using store and forward functionality where the card data is stored locally until a secure connection is re-established and then transmitting the transaction at that point. Another option is to fall back to manual data collection which is then reconciled at the end of the day either by manual data entry or over the phone. Consumers are less happy about these solutions since they leave card data in a less secure form temporarily but they are commonly used solutions.
Chargeback liability: Processors consider card present transactions less risky. You can still be on the hook for chargebacks with card present transactions, but your chances of chargeback liability with a card not present transaction may be higher. The EMV liability shift of October 2015 dictated what happens with certain types of liability for EMV chip cards. In simplest terms, if your business doesn’t have an EMV capable credit card reader and you accept a chip card by swiping it through a magstripe reader, you’re liable for fraud that occurs. If you use a chip reader, fraud liability stays with the processor or bank. Carefully negotiating transaction pricing and considering all-inclusive pricing can be valuable.
Pricing: There are two components to Card Present Solutions pricing. One is hardware pricing and the other is per transaction processing fee. You will want to know about hardware pricing for items like terminals and card readers, as well as for communication, networking and interfacing equipment. Various vendors charge flat fees, monthly rental fees and may or may not include maintenance contracts and upgrade contracts as options.
Where next?
Integrating both card present and card not present is referred to commonly as omnichannel payments. But true integration is much more than just omnichannel. It involves integrating into back-end solutions, and into ISV platforms and software seamlessly via APIs. It involves supporting as many aspects of the rest of the business as possible including reporting, supply chain, marketing and more. It means supporting the much faster times for starting a business and accepting payments that are now needed by modern business. And it needs to demonstrate security and robustness.
There are huge opportunities for omnichannel solutions and better integration of card present solutions into the complex systems that all forms of merchants use today, from restaurants to invoicing and billing to ecommerce and many other areas. The market is shifting towards omnichannel and towards integration as new players and fintechs enter the space and as existing players partner together to deliver better solutions. WePay, along with Chase Merchant Services, is ideally positioned to deliver on this kind of integration and put card present and card not present solutions together seamlessly.
You can find out more about card present and WePay's Card Present Solutions here.
Glossary
Payment types
EMV – EMV (Europay, Mastercard and Visa) or chip cards securely manage end-to-end encrypted cardholder data and carry security credentials to thwart hackers from skimming and replicating the card data. Currently, all cards have both the chip and the magnetic stripe for backwards compatibility. These cards can be physically inserted or "dipped" into a reader, and a more advanced version is contactless and can be read over a short distance with Near Field Communications (NFC) technology.
NFC – NFC (near field communication) is a technology that allows two devices—like a mobile phone and a payments terminal—to talk to each other when they’re close together. As a result, NFC is the technology that enables contactless payments. Examples of this are the use of Google Pay and Apple Pay at grocery stores, or tap to pay solutions at coffee shops. NFC mobile payments are dynamically encrypted, so they are one of the most secure ways to make a payment.
Terminals (POS) – A payment terminal, also known as a Point of Sale (POS) terminal, credit card terminal, EFTPOS terminal, is a device which interfaces with payment cards to initiate transactions. The terminal typically consists of a secure keypad for entering PIN, a screen, a means of capturing information from payment cards and a network connection to access the payment network for authorization.
Payment terminals are usually connected to POS systems so that payment amounts and confirmation of payment can be transferred automatically to the merchant’s retail management system. Terminals can also be used in stand alone mode, where the merchant keys the amount into the terminal before the customer presents their card and PIN or other identifying information.
Mobile card readers – Mobile card readers that turn smartphones into payment devices are a rapidly growing category. They have made credit card payment devices much more accessible to smaller merchants, are low-cost and open new payment opportunities.
Apple and Android Pay and other smartphone payments solutions – These payment solutions are effectively ‘cardless’ card present payments. They act like card present because all the card information is stored on the smartphone and transactions pass the same information as if they were card present. One smartphone can actually support multiple cards and the user can switch between them. It is important for card present solutions to support these payment methods because they are growing rapidly. Both technologies can also be used in card not present transactions although their usefulness to consumers is more limited in those scenarios.