You don’t have to wait until 2014 to save on merchant services and credit card processing. The new year is less than a month away and small business owners are already preparing for next year’s sales. As 2013 comes to a close, stores and companies with extra cash on hand may be reducing their tax burden by investing in infrastructure, upgrading technology, and adding equipment. The end of the year may also be the perfect time to get on top of trends in credit card acceptance, so you will be ready for all of the changes that are coming to payment processing in 2014.
Below are a few trends in the merchant services industry that may have an impact on your business:
- Prepaid Debit Cards – More and more entities are using prepaid debit cards to deliver salaries, benefits, and even health insurance payments. Companies that previously avoided taking cards of any type are now required to accept debit cards for payments. The “unbanked and underbanked” population, including the poor and elderly, now may have one or more debit cards with Visa or MasterCard logos. Because PIN-based debit transactions cost less to process, the addition of a PIN pad is a good investment.
- EMV Cards – Smartcards are gaining more visibility in the US, and are even appearing in advertisements. Travelers to Europe are advised to get “chip and PIN” cards if they want to avoid being stranded. The use of international credit cards and prepaid EMV debit cards is creating a higher level of familiarity with the technology. While the familiar magnetic stripe on the back of your credit card may not disappear tomorrow, as a merchant you want to be sure that your terminal (or a USB accessory) can take these cards when they are presented.
- Cheap POS Systems – Several players are getting into the “business in a box” game with iPad and Android based POS solutions. Square, First Data, Intuit, Shopify, and others are offering software and/or packages that include receipt printers and cash register drawers. In exchange for (relatively high) fixed-rate processing, some POS sellers may offer “free” iPads or cash register accessories. Even so, the DIY POS trend is expected to move more “cash only” merchants into accepting cards, and at some point they may seek cheaper processing solutions as well as more dynamic point of sale solutions.
- Merchant Cash Advance – Many businesses are still feeling the impact of the 2008 credit crunch, and have a difficult time getting loans from traditional banking institutions. Merchant cash advance solutions are becoming more diverse, and offer varying payback options and interest rates. New “peer to peer” lending options, as well as actual loans, are available to merchants.
For the most part, card processing trends can be very gradual, owing to the fact that bigger businesses may be slow to accept innovations in transaction authorization and card acceptance. However, when big box stores, large restaurant chains, and high volume online retailers improve their capabilities, or add equipment, then their competitors are quick to follow. In the past year, you may have noticed that contactless credit card terminals (or accessories) have been added to many checkout lines. Even though the general public has not adopted mobile wallets or contactless card use, retailers are confident enough in the technology to invest millions of dollars in preparation for it.
At CPN, we advise our small and medium sized clients to keep an eye on their competitors and take note of how their customers are taking payments. Many companies only modernize credit card acceptance technology when they learn that their rivals are using newer, more efficient machines and POS systems. In a business environment where customers may spend less, raw material prices are rising, and regulatory burdens may increase your costs, the ability to save on processing costs is critical.