Credit Card Authorization Process
Ever wonder how credit card authorization really works? Where does the credit card information go once you enter it into a credit card terminal or POS?
When a credit card is swiped and a credit card authorization process is initiated, the information is sent directly to a credit card processor. From there, the information is transmitted to the card-issuing bank through a bankcard association, where the transaction is either approved or declined. Finally, the bankcard association transmits the approval or decline back to the terminal or POS device.
During the credit card authorization process, a card may decline if it is expired or has insufficient funds. The transaction may also be declined if the card has been reported missing or if there has been suspicious activity on it. To further protect your business, banks now require credit card authorization for all paper-based transactions.
In order to process credit cards and initiate a credit card authorization, a business must sign apply for, and receive, a merchant account. Once a merchant account is set up, credit card authorization may take place through the use of an equipment terminal/POS.
Online Debit Card Processing
Not all debit card transactions are the same! For those merchants able to use a PINPad along with a credit card terminal, online debit card processing can offer a big savings. The difference between “online” and “offline” debit card transactions is that “online” requires the merchant to input their 4 digit PIN number and have their card swiped while “offline” functions exactly the same as any credit card transaction.
So why is does online debit card processing have such potential savings? Consider the bank’s perspective. When a customer presents their card for payment and then enters a PIN number manually, the chances of fraud are extremely small. Because if this, the costs for pin based, transactions, or online debit card processing, can be much lower.
When conducting pin based transactions, merchants are charged a flat fee for each order instead of a percentage rate (discount rate) plus transaction a fee. Assuming a merchant takes 100 debit cards over the course of a month (about 3 per day) and averages $85 per sale, a conservative cost analysis shows that a merchant could save over $100 a month, or $1,200 a year.
Contactless Payment Terminals
Contactless payment terminals have become the present and future of credit card transactions. Also known as "tap and pay," contactless payment provides benefits to retailers and consumers alike, particularly in the areas of speed and convenience.
Contactless payments are simply transactions that do not require physical connection between your customers’ credit card and the terminal. Smart chip technology, otherwise known as RFID, is supported by a secure controller, internal memory, and a small built-in antenna that transmits information to a reader through radio frequency.
The primary advantages of a contactless payment reader over traditional swipe cards are speed and convenience. Consumers can just tap the contactless payment terminal, eliminating the need for a transfer of hands with a credit card and a receipt signature. In turn, check-out lines become shorter as transaction times become faster.
Contactless payments are best suited for quick-service retailers, such as convenience stores, fast-food restaurants, movie theaters, pharmacy / drug stores, and gas stations and for those whose average ticket is $25 or less.
Retailers with major POS terminal providers can easily upgrade their existing system with a plug-and-play contactless payment device.