5 ways credit card processing machines have evolved in response to payment trends
New technologies drive trends in consumer behaviors. The bigger the technology, the bigger the shift. When consumer behaviors shift, merchants react in an effort to capitalize on the new opportunity. And over time, a new normal is created. And sometimes, a whole new industry.
Take cell phones for example. The invention and continued improvement of cellular phone technology has drastically changed how people communicate, shop, and entertain themselves. What began as a unique identifier of a small segment of the population—those who use mobile phones—has shifted to become a feature of the general population. Today, those who don’t use mobile phones are a unique population distinguishable from the mainstream.
The explosion of the mobile phone industry is just one of the impacts of the introduction of cell phone technology. Think about the market for mobile apps, phone accessories, social media platforms, and spin off technologies like Bluetooth and Wi-Fi that wouldn’t exist without the mobile phone.
The domino effect of cell phone technology adoption has even reached the payment industry. The mobile era has given life to payment trends like mobile wallets, in-app purchasing, person to person payments, digital coupons and promotions, and customer loyalty programs tied to mobile phones.
These evolving payment trends combined with other forces, like the ever increasing threat of fraud and data compromise, have had a significant impact on the type of payment options available to consumers and the credit card processing machines that merchants use to accept them. Let’s take a quick look at the five biggest changes in credit card processing machines today.
1. Credit card terminals that accept in-store mobile phone payments gain popularity
If you had to leave the house without your phone or your wallet, which would you choose? Regardless of how you answer, it probably made you uncomfortable to think about having to make that choice. Such is the importance of mobile phones in our everyday lives.
Millions of consumers use mobile devices in nearly all areas of life including work, entertainment, and communication. You can use your phone as a flashlight, a WiFi hotspot, or an appointment reminder, among hundreds of other uses. And you can use it to make payments as well.
Mobile payments are on the rise among consumers of all demographics. As they gain in popularity, more and more merchants are implementing credit card processing machines that can accept mobile payments in-store. Where digital wallets are accepted, rather than swiping a card, the customer can simply tap their phone to the terminal to initiate a payment.
Accepting mobile payments is beneficial to merchants because not only are they honoring their customers’ payment preferences (an important aspect of customer service), but they’re also more secure than traditional credit card payments.
A mobile payment generates a unique, one-time-use authorization code that can’t be used in subsequent transactions. So even if the code is intercepted by hackers during authorization, it’s useless to them, which reduces future fraudulent transactions.
2. Merchants adopt EMV and implement chip card terminals at a high rate
This chip card terminal "trend" is closer to a horizon shift than a trend, because it has come at the behest of the card brand associations with the blessing of issuing banks, rather than in response to organic consumer behavior.
A fraud liability shift beginning October 2015, for merchants processing in-store transactions, is pushing merchants to make the transition to EMV chip card acceptance at their POS terminals.
Already in widespread use in Europe and other major international markets, EMV is a newer protocol in the U.S. for accepting in-store credit and debit cards that have an embedded data chip. The chip contains the cardholder data necessary for completing a transaction and submits a one-time-use authorization code making it nearly impossible for it to be used successfully in subsequent transactions on counterfeit cards.
Processing EMV cards securely requires an EMV-enabled payment terminal. An EMV terminal is slightly different than a standard swipe terminal in that the customer “dips” rather than swipes the data chip end of the card into a slot on the machine and leaves it there until the transaction is complete.
EMV adoption and mobile payments acceptance go hand in hand since they both rely on NFC (near field communications) technology to work. Merchants leery of receiving more fraud chargebacks as a result of using out-dated swipe terminals to process chip cards have added incentive to replace standard terminals with EMV chip card readers since they will also get the benefits of being able to accept mobile payments.
3. Stand-alone payment terminals take a page out of the smartphone book
A few decades ago, stand-alone payment terminals resembled large calculators or adding machines and did little more than allow a card to be swiped for processing and perhaps print a receipt. In later years, PIN pads and signature panels were added. And eventually, many terminals featured a touch screen that allowed the cardholder to select credit or debit and request cash back.
The latest generation of these terminals resemble mobile devices like smartphones and tablets more than calculators. And they work more like a smartphone as well, offering third-party apps for different business management tasks like accounting, employee scheduling, and inventory management.
They also have modern technology like wireless Bluetooth connectivity, touch screen displays, and attractive, user-friendly interfaces.
Advanced smart terminals can even be left on dining tables in restaurants allowing customers to reorder drinks, add menu items, and pay their bill, without the assistance of a server. Some even provide entertainment by offering digital games on the interface.
4. Integrated POS systems become more specialized by industry
Smart terminals definitely have a smartphone edge to them. But their main source of inspiration is perhaps the integrated point of sale (POS) system. An integrated POS has built-in business management solutions, but they’re not necessarily third-party products like many of the apps used in smart terminals.
POS developers carved out a valuable niche in the payment industry in the mid-to-late 1990s by combining back office operations with payment processing functions in one robust system. By working closely with payment processors, and integrating directly with the payment processing platform, integrated POS machines offer a much greater range of functionality than a traditional stand-alone payment terminal.
Integrated POS systems have gained in popularity over the years because of their ability to align seamlessly with the day to day operations of specific industries. Whereas a stand-alone payment terminal functions the same for a retail operation as it does in a restaurant setting, an integrated POS system is tailored specifically for the industry in which it’s used.
For example, an integrated POS for restaurants has the functionality to list menu items to be selected by the server, a routing system to send orders to the kitchen and bar, and an internal clock to automatically change menu items depending on the time of day. At closing time, the floor manager can print out the day’s sales, separated by server, shift, section or any number of variables. Employees use the POS to clock in and out, adjust customer tickets, and even schedule shifts. Everything happening in the restaurant business is happening within the POS system.
New developments in technology and the maturity of the payments industry have impacted POS systems too, making them even more specialized than ever. Whereas in the early POS years, the main differences between systems were limited to big categories like retail and restaurant and full or partial integration with one or two payment platforms, today’s POS systems are even more highly segmented. There are solutions tailored for quick service restaurants that differ from those tailored for table service operations and they often offer payment integrations with multiple platforms.
5. Merchants adopt handheld POS systems
Customers aren’t the only ones looking to mobile devices for convenient payment solutions. Merchants are using mobile terminals to deliver better, more personalized, and responsive customer service.
The mobile terminal trend is taking off in two main ways: wireless but POS-connected handheld terminals, and mobile phones with an audio jack plug-in or wireless credit card swiper attachment.
Handheld POS terminals, often referred to as pay-at-table solutions in a restaurant setting, have broad in-store uses as well. Retail businesses that deal in large or cumbersome items like lumber yards, nurseries, and furniture stores find handhelds useful because they eliminate the need for the customer to come to the register to pay. Instead, the terminal can scan the product barcode, or access the item inventory in the POS, and accept a credit or debit card payment anywhere in the store or lot.
Even if the size of retail items doesn’t prevent in-store checkout, some businesses find them convenient for line busting during peak checkout times. They also come in handy when a clerk needs to check on product inventory for a customer, or to coordinate ship to store, or store to store product requests.
Bringing the terminal to the customer in a restaurant can significantly improve the customer’s dining experience, and can save servers time and energy by eliminating the need to run back and forth to the server station and POS terminal during the checkout process.
The other category of mobile terminals in which the mobile device (tablet or phone) becomes the payment terminal by attaching a swiper via the audio jack port, or by pairing it with a wireless Bluetooth device, is useful for accepting payments away from the business location.
These no frills mobile POS systems are helpful for companies that do business in the field, such as vendors that sell at craft fairs and trade shows or handyman service type businesses. Prior to the mobile terminal trend, these merchants were limited to accepting cash and checks, or in extreme cases, using knucklebuster credit card imprinters and processing batches of cards at once.
Small operators who don’t have a business location apart from the home or workshop find these mobile terminals to be a crucial aspect of doing business because the hardware overhead costs are so low, or even free depending on the provider. The ability to accept credit cards for the price of a small transaction fee and/or percentage of the sale with no major investment is providing a lot of revenue opportunity for a wide range of small businesses.
Finally, the most important thing to know about how payment trends have impacted credit card machines is that there’s a perfect terminal for every business, no matter the industry, the business size, or the customer base.
If you’re looking to upgrade your current terminal, or are just getting started operating a business and need a way to accept credit cards, contact Vantiv. We stock a wide variety of terminal solutions and partner with the best POS vendors in the country to deliver top-notch payment processing and customer service. Contact us to learn more about terminals.
Statistic image source: https://globenewswire.com/news-release/2017/04/28/974325/0/en/US-Payments-Forum-Spring-2017-Market-Snapshot-Merchant-EMV-Chip-Adoption-Clarifying-CNP-Fraud-Status-and-Increasing-Focus-on-Transit-Payments.html