What's at risk when you accept credit cards?
It’s no secret that customers like having lots of options, especially at the checkout counter. Merchants that refuse to accept credit or debit cards for payment not only face the prospect of irritating patrons, they are also turning away a large number of purchases. According to Community Merchants USA, the number of debit, credit and gift card transactions at points-of-sale already eclipsed purchases made with cash in 2011. This trend has continued into 2015 and the organization projected cash transactions will drop another 5 percent by 2017.
Despite this trend, a significant number of small businesses still do not accept credit cards at the register. The reasons are varied. Some merchants are wary of the expenses involved, while others are more concerned about the responsibilities of handing sensitive customer data. As merchants weigh the pros and cons of allowing customers to use payment cards, it’s important to know what the real risks are.
Risk of fraudNo matter how secure your business is, electronic payments make fraud a possibility. Criminals might try to buy merchandise using fraudulent cards, or cyberthieves may try to intercept sensitive customer data as it transfers from your POS system to the acquiring bank. Fortunately, there are many solutions that can reduce the risk and frustrate would-be thieves.
- Use advanced security features in your POS system –There are several payment processing solutions that can help you keep customer data safe from cyberattacks. Encryption and tokenization are two methods that can minimize the exposure of personal data and reduce risk for the merchant.
- Be careful about where you store data and who has access to it –Many instances of fraud occur because a virtual door is left open for criminals. Browsing the Internet on a computer where sensitive data is stored is just one way thieves can steal information from you. Knowing the risks and enforcing a company-wide security policy is a good way to keep careless mistakes from happening.
- Train your staff on how to spot fraud –Major credit card companies like Visa and MasterCard provide specific steps for how to identify a fraudulent card and alert the authorities. Make sure all employees who handle transactions are well-trained on these procedures.
Processing feesOne of the biggest reasons merchants won’t accept credit cards are the processing fees that come with them. Payment card companies charge a certain percentage on every transaction, and this can be worrisome to businesses that depend on high-volume purchases of small ticket items, such as convenience stores.
Despite these inevitable expenses, merchants can rein in costs by negotiating better rates with payment processors based on volume of transactions. You can also pay less in fees by having a strong security system in place that reduces the risk of fraud. Also, make sure your account and POS terminal is set up correctly. Small mistakes that lead to sending incorrect business information to your provider can be costly.
Bookkeeping expensesCard transactions add a whole new dimension to bookkeeping and auditing processes. In general, more transactions mean more time on the accounting side. The upside, of course, is that by making it more convenient for people to shop at your store or eat at your restaurant, the increase in revenue will likely offset these costs.
Most merchants find that the initial investment of time and money soon plateaus into a manageable aspect of doing business, a necessary burden that can often reap significant rewards. While every business owner must decide whether accepting payment cards is right for his or her business, more often than not, the benefits outweigh the challenges.