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Accepting Credit Card, Mobile, & Contactless Payments

Customer paying for food with credit card

Has a wallet full of cash become a thing of the past? As payment processing evolves and more options become available for safer non-cash transactions, consumers are utilizing mobile or card payments more often. According to 2020 research by the Federal Reserve, cash use has dropped in recent years, and now represents only 26% of payments. The onset of new technology, combined with the COVID-19 pandemic's increase in the demand for contactless payments, has further hastened the shift away from cash transactions.

If your customers are requesting new payment options, it may be worthwhile to add a capability for touchless transactions. Upgraded payment technology can benefit small and large businesses alike, giving them the ability to leverage the systems to increase sales, improve cash flow, and reduce the risk of accepting fraudulent currency.

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Benefits of Accepting Credit Card Payments for Small Businesses

Credit cards have been around for years, but recently added features have led to more secure, contactless transactions. When small businesses accept credit cards in addition to cash, they benefit from:

  • Improved customer perception — With credit cards accepted at so many outlets, customers may be wary of cash-only businesses. Credit cards have become a preferred payment vehicle, thanks to benefits such as an additional record of payment, online tracking of their monthly bill, loyalty and rewards programs, and assistance with payment disputes.
  • Increased sales with limited expenses — For many businesses, the investment in a point of sale (POS) system and the cost of processing credit card payments is outweighed by the increase in sales resulting from offering an additional payment option.
  • Mitigated risk of bad checks — Built-in security measures allow credit card issuers to help lower your risk compared to other payment types, such as checks or cash.
  • Improved cash flow — Rather than sending an invoice and waiting for payment, credit card transactions are processed quickly, which helps meet the cash flow needs of your business.
  • Increased Customer Spending One of the most overlooked benefits is the increased spending by customers that use a credit card.

Different Ways To Take Credit Card Payments

Not only do credit card payments offer an alternative payment method when conducting business in-person, they also expand your ability to collect funds related to remote transactions. Multiple payment options can be offered to customers who wish to make a card payment, including:

  • In-store credit card payments — Shoppers pay in-person by swiping or tapping their card, or inserting the chip end into a payment terminal.
  • Online credit card purchases — Customers enter credit card information into a secure website when shopping online.
  • Credit card payments via telephone — Although not considered as secure as in-person payments, telephone payments are possible where customers provide their account information, which is entered and verified via payment processing software.
  • Mobile credit card payments — Mobile payments can be accepted in a retail store, or when transactions take place at an outside location. For instance, repair services or plumbing companies may accept mobile payments via a card reader attached to a cell phone. Payments can be processed quickly via a connection between a buyer's smart device, such as a cell phone, and a mobile payment device.

How To Accept Credit Card Payments

If you'd like to start accepting credit cards, there are several steps you will need to take to set up this payment method.

Choose a Payment Processor

Your choice of a payment processor will generally depend on the amount of credit card sales you accept each month.

Payment service providers: If you expect to have only a few credit card sales each month, you can simplify the process by using a payment service provider. Payment service providers typically charge a fee based on a percentage of each individual transaction. Also known as payment aggregators, payment service providers combine a group of smaller businesses into the same merchant account. This helps the payment service providers deliver access to credit card processing to smaller businesses, but there tends to be less individualized customer support.

Merchant services: Businesses with a larger number of credit card sales should consider using a merchant services provider for credit card processing. When you engage a merchant services company, your business will open a merchant bank account to process payments. Merchant service providers may charge different fees based on your company's credit card volume and the complexity of the payment services they need to provide. Merchant service providers also offer services such as a designated contact for customer service assistance, additional risk management procedures, and expanded abilities to accept different forms of credit card payments, such as chip cards and online payments.

No matter who you choose to help you process payments, you should carefully review the contract before signing.

Select Your Credit Card Payment Terminal

Once you've chosen a payment processor, you'll need the equipment to facilitate the credit card sale. If you intend to offer in-person credit card purchases at your office or retail location, you'll need a payment terminal or POS system to allow customers to swipe, insert, or tap their card. If you work outside of the office, a mobile payment device may be needed.

Set Up Capability for Online and Phone Payments

If desired, configure the technology you need to process payments when a credit card is not physically present. An online payment gateway can be set up through your payment processor for internet-based sales. Likewise, you can add software to your computer that will allow you to process credit cards over the phone.

No matter which credit card payment option you choose, make sure to read and understand the contract with your payment processor. Compare several payment processing options and review the fee structure and terms offered to determine which one will work best for you.

What Are Mobile Payments?

The COVID-19 pandemic accelerated the demand for mobile payment options in retail settings. These mobile payments rely on communication between a customer's portable device such as a cell phone and a POS system that can process the transaction wirelessly.

Benefits of Mobile Payments

Adding mobile payments can further increase sales and help you meet consumer preferences for fast, cashless transactions. Additionally, mobile payment acceptance benefits both customers and small businesses. Some of the advantages include:

Speed — Mobile transactions are processed quickly and funds are transferred easily.

Convenience — Customers may no longer carry cash, but most will have their phone on hand, giving them the ability to conduct business with a digital wallet or payment app.

Built-in verification — Mobile wallets or apps contain built-in verification procedures such as facial recognition or password-protected logins to enhance the security of payment transactions.

How To Take Mobile Payments

Mobile transactions use near field communication (NFC) between a business's POS and a customer's cell phone. Once a POS is set up, payments occur through digital wallets such as Apple Pay or Google Pay. Customers hold their phones up to the POS terminal and information is transferred wirelessly, allowing for a contactless payment.

What Is Contactless Payment?

The demand for contactless payments also grew as the popularity for touchless transactions increased during the COVID-19 pandemic. As a result, more businesses began to integrate the technology to safely accept customer payments without the need to provide a signature or enter a PIN in a card reader. Contactless payments use radio frequency identification (RFID) along with NFC technology to accept payments without the need to swipe, enter a PIN, or physically sign for a purchase. Mobile payments are considered contactless, but credit cards, debit cards, and even smart watches may contain contactless capabilities.

How Does Contactless Payment Work?

When customers make a purchase, a POS system will display payment instructions, including the option to tap, swipe, or insert a card. Those paying with a digital wallet may be asked to hold their portable device near the POS. At this point, the customer may choose a form of contactless payment to complete their transaction. Their credit card or mobile device will emit radio waves, the seller's POS system picks up the signal from the radio waves, and the payment is processed.

Contactless Payment Options

The most common contactless payment options are credit cards, debit cards, and mobile phones. As acceptance grows, touchless payment technology is being integrated into additional devices. Contactless payments may be conducted through the following additional devices:

  • Wearable devices such as smart watches and fitness trackers
  • Smart cards
  • Wristbands
  • Key fobs
  • Stickers
  • Lanyards or badges

How To Take Contactless Payments

The process of accepting contactless payments with a credit card is similar to accepting mobile payments. First, your POS system must be configured to accept contactless payments using RFID or NFC technology. When the customer taps their card against the POS, their account information will be transmitted and processed by a payment processor. A record of the payment will show up on their credit card account within 2–4 business days.

What Is the Best Way To Accept Credit Cards for Small Business?

With so many payment options now available, narrowing down what is truly needed by a small business can seem daunting. You don't want to invest in a payment system that is rarely used by customers. Preferred payment options may vary depending on the type of business, the number of customers, how many payments are processed each month, and the company's cash flow needs. For businesses with more versatile needs, a POS system with NFC and RFID capability can be an efficient option because it allows for credit card, mobile, and contactless payments. Portable devices that accept credit cards can also be helpful for small businesses conducting work outside of an office or retail location, such as payments for in-home services or repairs.

Explore New Payment Options for Your Small Business

As technology has advanced and customers have become more comfortable with contactless payments, small business owners may find it beneficial to accept credit card, mobile, and contactless payments in addition to cash. Newer payment options will appeal to a greater number of consumers, and provide an opportunity for small businesses to expand sales and improve the security of payment transactions. Learn more about the various payment processing solutions Paychex has to offer today.

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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.