The preferred method of payment for consumers is credit or debit cards. Only 20% of consumers pay with cash, while 80% of total consumer spending is with a card. And, what’s even more interesting is that 100% of consumers 18 – 24 years old reported using a card for everyday purchases, such as gas and groceries.
Customers expect to pay with a credit or debit card. Accompanying the convenience is a cost to retailers. To better understand the costs associated with each transaction, it’s important to learn about the system generating the fees and how to get the most out of each transaction.
Understand The Discount Rate
The network each transaction must travel is connected through a series of devices, merchant service providers (MSP), and banks. For each transaction, card processors and banks capture a set percentage—the discount rate. These fees are the cost of doing business at nearly the speed of light.
Merchant service providers connect the consumers with their card issuing banks. Through secure networks, consumer information captured through a strip reader is confirmed with the MSP and sent to the backing member of the credit card association; VISA and MasterCard are the most common members of the association.
Through the card association, your customer transaction reaches its final destination at the card issuing bank, where the approved or declined transaction is sent back to the merchant. Each stop along the way is assed a fee.
The fees are dependent upon your transaction volume and best accounting practices. Volume is self-explanatory, however, consistent accounting practices and account set up are important. When each transaction incurs fees anywhere from 1% to more than 4%, you should be aware of your best, low cost options. Many sources suggest choosing a processing company that is transparent about their fees.
Safe and Secure
Anyone involved in a card transaction has to abide by the Payment Card Industry Data Security Standard (PCI DSS), which is actually a whole set of security standards that govern consumer transactions from the physical terminal to the software that transmits your card information.
These standards created the latest changes in the card payment process through the requirement of the EMV chip and chip reader. Today, any merchant without a chip reader may be liable for credit card fraud that may occur during a transaction. Reduce your risk through investigating your vulnerabilities along the payment chain.
Timeliness of the Transaction
You want your customer’s experience to be quick and painless at the point-of-sale. The newest security standards have slightly increased wait times at the cash register. But, this is to protect their account information and identity.
During the first few months of implementing chip reading technology, inform customers of the reason for the additional time and how their personal information is being protected.
Skimming and other fraudulent scams have been found on non-compliant terminals throughout the country. Consumers may become leery or afraid to use terminals that neglect these standards. A great way to improve the customer experience is to make them feel comfortable, even though it adds on a few seconds at the point of sale.