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Merchant services : Getting the right card payment terminal – and getting it right
A card payment terminal or “credit card machine” is, quite obviously, the required device to allow credit card or debit card transactions in any given shop. With the evolution of customer preferences and payment methods, different types of terminals have been introduced in the market, and, more significantly, different card payment terminal providers have surfaced. With their new kinds of devices, boasting new features, and their new pricing structures and attractive plans, these new providers are shaking from the ground up a market which used to be largely controlled by high-street banks. The downside is that with so many providers, it’s harder than ever for the poorly informed shop owner to choose the right terminal for his needs.
The best way to compare card payment terminals is to first get a detailed understanding of how these devices work, of their different types, and of the main providers on the market.
Several tips can then be observed to select the best card payment terminal for one’s needs.
But getting the right payment terminal is not the full story: how to get it matters even more than what to get, and the choice between actually buying a card payment terminal and simply renting is crucial.
Card payment terminal basics
Card machines are essential to allow electronic commerce, but also online commerce, to accept credit card payments and come in different types. Many providers are now represented on the market, but with very different business models.
How card payment terminals work
Card payment terminals, PDQ machines, card machines or chip-and-PIN machines as they are also called, represent the sole human-machine interface which allows transactions involving electronic money in stores.
Technically, the terminal is connected to the Electronic Point of Sale system or ePoS (a till allowing and registering electronic payments) and payment gateway, and is used to:
- Read the card information,
- Connect with the cardholder’s bank servers,
- Authorize the transaction,
- Retrieve the response to the customer and to the shop operator,
- Trigger the printing of a receipt.
All these operations require a limited number of physical devices, which can be put together in a standalone machine or separated:
- A keypad to enter the code and transaction details,
- A display to read transaction information,
- A card reader,
- A receipt printer.
In some cases, this interface is not even physical: virtual card payment terminals are the software which allows e-commerce shoppers to enter their credit or debit card details to make payments online.
Depending on the payment method used, PDQ machines can be made to accept:
- Chip-and-PIN payments, with “smart cards”,
- Swipe payments, using magnetic stripes of older-generation cards,
- Contactless payments, using NFC chips and radio receivers.
Finally, PDQ machines can either be:
- Wired, for tabletop use, directly connected to the ePoS by cable,
- Portable or wireless, which can be used up to 100 metres away from the ePoS thanks to a Bluetooth or Wifi connection,
- Mobile, which can be used basically anywhere a cell phone signal can be caught thanks to an internal modem, or because they are connected to a mobile phone.
Card payment terminal providers
There have traditionally been two types of providers:
- Hardware manufacturers, which usually seldom sell their machines directly to end users,
- And banks, which usually rent the machines to their B2B clients as part of their service package.
The first category, hardware manufacturers, has a relatively small number of players, the most notable being:
- PAX Technology.
The second category includes most known high-street banks, as well as specialists such as Netpay, WTS or 123send, which provide the same kind of hardware-service-software package. Terminals are sometimes sold, and sometimes, the machines are refurbished.
A third category of players has appeared, as virtual card payment providers started to manufacture and sell their own, specific PDQ terminals for in-store use, directly to business customers.
The terminals they sell (instead of renting them) are proprietary devices, usually simple card readers, and connect with their mobile ePoS software to make card payments possible.
Such new providers include:
Tips for selecting the best card payment terminal
With such a number of different providers and different types of devices, it’s essential to remember a few tips to properly choose the device which will match specific business needs best. These tips fall into four broad categories: picking the right financial services, understanding fees, selecting the right provider and selecting the right type of machine.
Selecting the right services
It should be kept in mind that accepting card payment does require a merchant account. It is not an option, it’s just necessary. A merchant account is a dedicated bank account on which the customer’s funds are deposited right after the card payment is made. After a certain period of time, from a few hours to a few business days, the funds are then transferred to the shop owner’s business account and made available.
Just how many days are needed until the funds are credited to the business account, and how often they are, are important discriminating factors between providers.
Other services are necessary, but available at different levels and in different plans:
- Payment security,
- Customer service and support, on both business and technical issues.
Finally, other services may or may not be needed:
- Foreign currency accounts,
- Foreign card compatibility.
Deciphering credit card processing fee structures
It can be extremely complicated to compare card payment terminals costs, not only because the machines are usually provided in a hardware-software-service package, but also because the fee structure can be very intricate.
On top of the terminal rental fee, credit card processing costs therefore may or may not include:
- Setup fees,
- Exit fees,
- Monthly fees,
- With or without a monthly minimum service fee,
- Card transaction fees, which can be flat, percentage-based, or both,
- Chargeback fees.
To make things even more complicated, these fees will change depending on the business profile of the B2B customer.
It’s therefore extremely important to make usage scenarios, with forecasts about how many transactions will take place in a given month, and also about the average value of these transactions.
Understanding the different machine types – and how they do or don’t match one’s needs
Depending on the device, rental fees can rise fourfold between a simple model and the most elaborate one.
Prospective business users should therefore consider whether they need:
- A simple machine which can be used just next to the till,
- A machine which can be used in a wide area to literally bring the payment processing to the customer,
- A machine which can be used anywhere, far from the shop,
- A PDQ machine which can accept online or on-the-phone payments.
Other issues include:
- Compatibility with existing equipment, hardware or software,
- Parts availability,
- Package contents: will the buyer need to get accessories like a printer, wireless reader display or mount separately?
Choosing the right provider
Selecting the right terminal provider is not just a matter of selecting the provider which can deliver the right device, at the right price, with the right services.
It’s also about choosing between banks, pure players or new players as explained above.
Most importantly, the right provider is a provider who’s trusted by the B2B client, and it may be essential for some to know if they’re dealing with a third-party reseller. A good advice is to request several quotes in card payment terminals to compare different providers.
Renting VS buying: the number one question
Finally, there’s a question which guides all the selection process between card payment providers: should the equipment be purchased or should it be rented?
Advantages of renting a credit card machine
An overwhelming majority of card payment terminals are hired by the shops owners. Why? Because the historical distribution channel of these machines has always been the big high-street banks, which decided to make their business customers rent the devices – and pay the financial services bundle that goes with the hardware.
This is the main advantage of such deals, but others are worth mentioning:
- Shop owners are doing business with people who know their business, in case they’re dealing with their usual bank,
- Low upfront costs,
- Instalments seem cheaper than buying the machine outright,
- Machines can be replaced anytime, because they get faulty or just because they get outdated,
- Security updates and servicing is managed by the provider,
- Hiring a PDQ machine is no longer necessarily tied with banks,
- And it’s no longer necessarily tied with long contracts either, as some providers propose rentals for anything from 1 year to 1 day!
Advantages of buying
Conversely, buying the card machine also has its advantages:
- As prices are falling, the hardware itself quickly becomes cheaper than if it were hired,
- Transaction fees may be cheaper,
- Business user can set up his own custom installation and integration,
- New players on the market sell their machines, which have interesting features, notably for mobile payments, for a ridiculously low price – sometimes as low as €20 when discounts are applied.