Payment Solutions

Today there’re many solutions the customers in United States Can choose from when you reach for their wallet. No matter what the options you’re looking to provide is, we have options and solutions to meetThe needs of in person and online merchants, specifically in the parking and e-commerce industries today.

This article talks about many of the payment solutions to look for when selecting merchant service from a payment solutions provider (PSP) for their business. GAM Payments provides processing for all of these payment types.

Credit Cards

The most common method of cashless payment are credit cards. These are usually branded with the four major networks, Visa, Mastercard, American Express or Discover. Credit cards are a financial product where a customer is issued an account by a financial institutions (typically a bank) which allows them to purchase goods and services and pay for them at a later date and time.

According to the American Bankers Association (ABA) There were 374 million open credit card accounts in the middle of 2019. (Data source from ABA)

Number of Card Accounts by Credit Risk:

    • 197 Million Superprime
    • 103 Million Prime
    • 74 Million Subprime

You can tell the card brand based on the first digit of the card number 3= Amex  4= Visa 5= Mastercard 6= Discover.  Learn the history of each credit card brands here.

Credit Card Acceptance (Interchange) Fees:

The fees to accept credit cards consist of a fixed transaction fee plus a percentage charged by the bank that issues the card (ex: for a Bank of America Visa, the issuing bank is Bank of America) as well as fees charged by the card brands (ex: Visa, Mastercard, American Express) the processor (ex: First Data, TSYS or Vantiv) and monthly fees for transaction. These fees are typically $0.04 – $0.20 and 0.80% – 3.6% ranges, determined by type of card, industry you are in and acceptance method.

 

 

Debit Cards

Unlike credit cards where a bank is effectively loaning you money for a transaction, debit card charges are taken from your bank account the same day. This means there are no interest fees since you are spending money that is in your own bank account already. Debit Cards are incredibly popular making up 66.9% of total transactions in 2018 according to the US Federal Reserve.

Debit Card Acceptance Fees:

The fees to accept debit cards are similar to credit cards in that they consist of a fixed transaction fee plus a percentage charged by the bank that issues the card (ex: for a Citibank Visa Debit, the issuing bank is Citibank) as well as fees charged by the card brands (ex: Visa, Mastercard) if they travel over their network and the processor (ex: First Data, TSYS or Vantiv). These interchange fees typically range from $0.04 – $0.22 and 0.05% – 1.65% ranges, determined by type of card, industry you are in and acceptance method.

From an acceptance rate perspective, there are 2 kinds of debit cards, regulated debit cards and non regulated debit cards. Cards that are regulated means that the bank who issued the card has over $10 Billion in assets. Regulated debit interchange rates have higher fixed fees than non regulated debit cards, which are issued by a back with fewer than $10 Billion in assets.

Learn more about how debit card processing works.

ACH Payments

The Automated Clearing House or ACH was created in the 1970’s when the increasing volume of paper checks was thought to soon be higher than the computer systems that we in place could handle. This is how most payrolls are run as well as many electronic transactions are run. For example, when you send a payment using Venmo or Zelle not using a credit card, you are sending it using the ACH Network.

ACH was established by NACHA (National Automated Clearinghouse Association) which in 2018 processed 23 Billion transactions totaling $51.2 Trillion according to Digital Transactions, a payments industry magazine. The ACH network is a completely separate system than credit cards use.

For the past few years, ACH has increased it’s speed moving from 1 daily window to 3 daily windows meaning ACH can clear to someones account the same day.

ACH Acceptance Fees

ACH acceptance fees are lower than credit card fees and for standard ACH are typically $0.25 – $1 per transaction with some transactions having an additional percentage added. Same day ACH does have additional fees which are determined by the network and the payments provider.

You can learn more about ACH in another of our articles here.

 

Contactless Payments

The ability to pay via a contactless method has become much more popular and a competitive advantage for payment processors to add to their payment systems. Contactless is typically considered the ability for a customer to add payment card information into their mobile phones and then be within proximity of a reader attached to a cash register (point of sale) terminal to pay. This uses NFC (near-field communication) to send payment information to a terminal.

During Covid-19 pandemic, some merchants are saying that using a virtual terminal or MOTO (mail order telephone orders) where a customer verbally gives their PAN (primary account number) to a merchant as contactless payment, but this is not what most in the payment industry would consider contactless.

The 2 largest payment systems for accepting contactless transactions are Apple Pay and Google Pay. These are gaining in popularity mainly because they reduce friction in the customer buying experience.

Google Pay

This is a project owned by Alphabet, the parent company of Google. It was formerly launched in 2015 as Android Pay which was a successor of Google Wallet released in 2011.  Available on Android devices, customers add cards by taking a photo of the credit card.

Apple Pay

Started in 2013 by Apple, this EMV tokenization service allows customers to take a photo of their cards and create tokens to be used by customers. Integration with the apple watch and iPhone are decreasing the need for physical cards and has been sped up by Apple issuing the Apple card in March of 2019 in partnership with Goldman Sachs and MasterCard.

 

Push Payments

If you have seen a ride share driver who can get paid at the end of the day and see money instantly, you have seen a push payment service in action. This is when a transaction is initiated and sent as a real time payment. This is a huge opportunity because fo the speed. This also presents a large risk to consumers because the money, once sent can be withdrawn from the receivers account making mistakes much harder to solve.

This also can be used in a crisis, when issuing refunds, online betting or other times when a merchant wants to send money faster than the credit card or ACH networks which can take days to appear in a bank account.

 

Payment Acceptance Methods

When paying for goods and services, businesses need to use a merchant account for card payments. There are a few main ways that payments are accepted.

In Person Terminal

The most common approach in person is the physical terminal. If this is not attached to a cash register point of sale, it is referred to as a stand alone terminal. If it receives payment information but is still encrypted to keep up with emv chip and pin security standards, it is called a semi integrated solution. The largest brands that manufacture terminals are Verifone, Ingenico and PAX though there are many companies that have a wide variety of offerings to support in person terminal transactions.

Virtual Terminal

One of the many ways to accept electronic payments is by using a virtual terminal. The most common place to see virtual terminals is through a feature in a payment gateway or on an app on a phone.

Payment Gateway

When making purchases from an online store, the eCommerce platform uses a payment gateway to pass the electronic payment from the software being used to run the website (ex: Magento, WooCommerce, Shopify) to the payment acquirer. There are many other functions of gateways that can be tailored to the payment process needed for specific industries or to better screen for fraud or manage transaction routing.

When managing recurring billing, gateways are invaluable and are leaned on heavily by companies who accept monthly payments. The business takes the customer card information and sends it to a payment gateway. The online payment service then receives encrypted number called a token which can be used to charge a card again, but only has value to that specific business who created the token. This allows companies to remain within PCI compliance while being able to charge cards for repeat customers easily.

Mobile Payment Solutions

Especially in home services, the ability to use a reader that connects to a smartphone or tablet, often by plugging into the headphone jack or via bluetooth, has become commonplace. This has also grown into being able to use a mobile POS or being able to send payments via SMS text message or by sending a link via text which people then connect to a web browser to complete payment.