Merchant services: How to accept electronic payments anytime, anywhere with credit card terminals
A credit card terminal is an essential part of any Electronic Point of Sale (ePoS) system for retailers who wish to broaden the scope of payment methods accepted in their shop – or online. Beyond a few basics as to how every credit card payment machines work, there are several distinctive features to each major type of terminals. Card machines have furthermore progressed to a new level with the introduction of mobile credit card terminals, which represent a very innovative value proposition.
What are the major types of card terminals today? How do they work? Why are mobile solutions different? And what kind of additional hardware and software is necessary on top of a card terminal, in order to get a complete electronic point of sale system?
Credit card terminal basics
Credit card terminals represent the payment interface of a point of sales system, a necessary tool to process electronic payments. Different types of card machines are available on the market, for different uses.
How do card processing machines work?
Card terminals (they actually all work with credit cards as well as with debit cards) or PDQ machines are human-to-machine interfaces enabling payments to be registered and processed by an electronic point of sale system.
They may be split into as many parts, or standalone machines putting together:
- Different types of credit card or debit card readers allowing different payment methods (swipe, chip-and-PIN, contactless),
- A keypad to enter a PIN in case of a chip-and-pin capability, or also transaction details,
- A printer to issue receipts after the transaction is processed.
After transaction details have been entered by the retailer through the point of sale system (POS) – the till – or directly on the PDQ itself, shoppers enter their PIN swipe their card or use contactless to make their payment. Information is sent to payment gateway, authorization is processed and transaction is either accepted or not.
Types of credit card terminals
In the UK, credit card terminals following these simple principles can be found in many forms:
- Wired, countertop card terminals are perfect for small shops and fixed sales counters, where payment is always taken at a static till point. This is the standard countertop system that has been tried and tested over many years, and which doesn’t necessarily come as a standalone machine. Because the entire system is in one place, a reliable connection is guaranteed and costs are kept low.
- Portable card terminals or wireless terminals are more fitting card machines for businesses such as restaurants, cafes, or pubs and work within a 30 to 100-metre radius from their base. As they allow payments to be taken where the customer is, rather than having that customer come to the counter, they provide an excellent level of professionalism and customer service, especially for restaurants.
- Mobile PDQ machines in the traditional sense are necessary for any business which takes a product or service directly to a customer (plumbers, cleaning companies, take away services etc), outside a shop. These battery-powered, standalone devices traditionally work with a built-in GPRS or 3G modem, and allow transactions to be processed wherever cellular networks can be reached.
- Virtual credit card terminals are not physical machines, but rather software interfaces which allow “cardholder-not-present” payments, like payments over the phone or mail-order payments to be processed. Retailers enter both transaction information and card details into the software, and the payment is fully processed online.
Credit card terminal costs
Several costs have to be taken into account when considering acquiring a card terminal.
The first source of costs is the terminal itself. Card terminal prices can vary considerably, and until recently, it was arguably quite expensive to buy a credit card terminal, so most users actually prefer to rent their equipment and pay monthy instalments. Another solution is to buy refurbished equipment.
The second, major source of costs is related services costs. Transaction and merchant fees are incurred on every transaction made, determined by the payment card’s bank and the merchant service provider. Typically this will be between 1-5% of the transaction value, although some credit card processing companies may also, or solely, charge a flat fee. There is also usually a minimum monthly transaction rate. Working out projected sales is the first step to finding which merchant account provider will give you the best rates. It is also advisable to check the fees charged by different credit cards. Some can be high, which is why certain cards are not universally accepted amongst small businesses.
The mobile card terminal revolution
Although business owners often just consider the convenience they bring to customers, PDQ machines offer many benefits to small businesses, related to added convenience, but also to added security and additional business.
A different type of payment terminals
In order to enable on-the-go, truly mobile business, card machines with a built-in-modem are now superseded by a new generation of mobile payment terminals which connect to an external modem. And since the external modem is actually a smartphone or connected tablet PC, running all business applications, it’s the whole point of sale that’s going on the road, right in the salesman’s pocket.
This also enables mobile terminals to be extremely diminutive devices. As a pocket printer can be easily connected to the mobile phone, and as the mobile phone itself can be used to key in card details and display information, the only extra hardware really required is a card reader, which can connect wirelessly or physically to the mobile computing device.
These solutions like SumUp, iZettle or Shopify accept all major debit and credit cards, as well as cardholder-not-present payments, and new payment methods such as contactless, Apple Pay, Android Pay.
A fully mobile solution
Another big advantage of these new mobile solutions is that they are usually not commercialised by traditional banks but by pure players. In Ireland, card machines used to be sold exclusively by banks or third party specialists, to be tied with merchant accounts and other financial services provided by these same banks. The fact that these devices are commercialised and sometimes even manufactured by these new players makes their credit card solutions significantly cheaper. And as these many new players also provide the financial services and software necessary for credit card processing, it’s possible to keep traditional banks completely out of the picture.
All these hardware, software and pricing features and benefits make the new kind of mobile credit card terminals the perfect card machines for small businesses.
What point of sale equipment for my card machine?
Credit card terminals, especially the new mobile terminals, usually need extra hardware, and more importantly software, so that the retailer can enjoy a full, working electronic point of sale system and actually accept card payments. And that’s not even mentioning financial services like a merchant account, which are absolutely vital to accept credit or debit card payments.
Types of point of sale hardware
Point of sale hardware includes many devices which may or may not be necessary.
Necessary hardware includes:
- A till or point of sale system, which may just be a computer running point of sale software,
- A printer for receipts, if the credit card terminal doesn’t have one.
Other types of hardware which retailers may need include:
- A cash drawer,
- Several stands, in the case of a mobile credit card terminal, so that the tablet, the card terminal itself or the printer can be turned into a countertop system,
- A customer display,
- A barcode reader,
- A banknote scanner,
- A virtual card terminal and payment gateway for online payments.
Types of point of sale software
But when electronic transactions, online transactions, card transactions and mobile transactions are concerned, when we’re dealing with a true electronic point of sale system or ePoS, the core of the system really is about software.
Software is what truly differentiates all types of point of sales on the market.
Such software can either be:
- Proprietary, and work only with one type of card terminal from the same brand (this is often the case with modern mobile card terminals),
- Commercial, and work with any card terminal.
Technically, this software can also be run from a local installation, or cloud-based, so it can be used anywhere an internet connection is available without installing anything.
Finally, it can be available to run on some computing platforms, and not others.
However, most point of sale software is now cross-platform, and at least has a cloud-based version and a mobile application version.
Popular point of sale hardware used to make card terminals and card payments work include:
- PayPal Here,
- Tiger POS,
- Cashier Live,
- Brilliant PoS
- ePOS (the brand),
- Bluestore Live,