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According to the World Economic Forum, we are living the beginning of a monetary revolution. The convergence of technological innovations in the telecommunications, banking and retail industries has led us towards an increasingly cashless society in which consumers are accustomed to and dependent on the convenience of alternately paying. Many buyers, especially younger ones, rarely carry cash, and checks are even rarer.
On top of that, the COVID-19 pandemic has further pushed the shift away from hard currencies towards cleaner, more efficient, and contactless digital transactions. After more than a year of mostly online shopping, customers have new expectations and preferences for the payment options businesses should offer. Small businesses need to constantly adapt, combining the convenience of digital processes with the human element of face-to-face interactions.
Of course, as many business owners know, there is a loss of value in payment processing when a transfer occurs with the participation of a third party, as opposed to the equal exchange of value that allows cash. However, if harnessed properly, digital payments can benefit businesses and consumers and ultimately generate more return on their investment.
Related: 25 payment tools for small businesses, freelancers and startups
Payment processing must be integrated – incorporated into a system that communicates with all other critical software used by a business. Done well, this means there’s no need to switch between systems, simplifying the checkout process and getting customers on their way with less time and hassle. Because one of the customer expectations that businesses can count on is the need for convenience; the faster the payment, the more satisfied customers are. You can provide such convenience by securely storing card information for future visits, so that loyal customers get even faster contactless transactions. Plus, if needed, it allows service companies to easily charge for no-shows or cancellations.
Related: Find out how the right payment processor can drive more sales
Integrated payment processing also helps consolidate financial reporting, reduce human errors, and streamline accounting. By synchronizing accounting software systems compatible with integrated payment processing (i.e. QuickBooks), businesses can import all revenue processing data directly into their accounting system.
It’s easy to overlook the importance of choosing the law integrated system, however; the initial approach might be to just take the card, get paid… the end, right? But paying attention to the details is essential. A one percent difference in each transaction fee can quickly run into the thousands of dollars. Some payment services may, for example, charge more in cases where the card is not present, such as in payments over the phone. In the age of curbside pickup and contactless delivery, where customers expect to be able to pay off-site, this can have a significant impact on bottom lines, so small businesses should take note of these. seemingly minor issues.
Here are some other terms you should know about payment processing:
- Base points): A basis point is one hundredth of a percent (0.01%). Most credit card processing fees are fractional percentages, so instead of saying “zero point zero one percent” your processor may say “one basis point”.
- Group: It is basically a digital shopping cart that collects transactions. It allows you to receive a deposit that includes multiple transactions instead of one per transaction. Usually you will keep it open for a day (or create one per employee).
- Discount rate: A credit card processing discount rate is not a discount in the traditional sense; in fact, it’s almost the opposite of what you might imagine. This is actually the percentage rate charged to your business for the volume of credit cards processed.
- Exchange: Interchange fees are charged by card networks (Visa, Mastercard, Discover and Amex) which facilitate transaction processing. These are billed to customers on an Interchange Plus pricing model and often appear on monthly statements as “interchange fees”.
- Near field communication: NFC is the technology that powers Apple Pay and Google Wallet. It allows certain cards or mobile phones to communicate payment information securely when tapped on or near a device.
Related: 5 questions to ask about your payment collection process as the economy opens up
Businesses that still primarily use cash are wasting time and money. And these are not the only losses: manual counting of services and complementary products takes time and increases the risk of error. Even credit card processors require an extra step to handle tips, cancellation fees, member billing, or the finances of the business as a whole.
Payments are no longer a passive part of business operations and the customer experience. Integrated processing offers new opportunities for businesses to add value to services, and the post-pandemic world will not reverse the technological advancements it has required. Payment preferences and best practices will continue to evolve, and small businesses will ultimately need to update them to stay current and grow.