The Myths of Online Credit Card Processing Busted

Hands holding credit card and coffee to go.

Online credit card processing is way cheaper compared to traditional POS (point-of-sale) systems. Using your credit card through merchants and services that accept credit cards using online platforms and mobile devices is usually stressful, not to mention a hassle to set up. Besides, customers would never dare to compromise their security by swiping or saving their credit cards online or on mobile devices.

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All of these are just some of the myths that surround mobile and online payments, which make online credit card processing a lot easier for merchants using tablets and smartphones. Merchants usually process payments using physical credit card readers attached to mobile devices or by scanning the previously stored credit card information from mobile applications (as is the case with the mobile wallets). The benefits of using this system include convenience, streamlined POS system, and the access to a breadth of business opportunities depending on the collected consumer data. Nonetheless, mobile and online payments as a whole remain to be a highly debated topic amongst retailers, customers, as well as the industry experts.

Although the adoption of mobile and online payments has been slow, consumers are gradually shifting their preferences as many merchants implement mobile and online payment technologies that are made easier and accessible by the major mobile payment players like Square and PayPal. In order to stay competitive, it is more important for small businesses to stay current and also understand where the mobile payment technology is headed. If you are considering adopting mobile and online credit card processing, or even if you’re simply curious about the technology, here are 10 credit card processing myths that you might have heard despite them being completely inaccurate.

1. Setting up is complicated and difficult

Setting up online credit card processing usually involves downloading the vendor’s application and following all the necessary steps so as to get the software and hardware up and running. The beauty of most modern payment solutions is the fact that like most mobile applications, they’re built to be intuitive and user-friendly so that merchants would have less trouble setting them up. Majority of the mobile payment providers normally offer customer support so you can give them a call anytime in the unlikely event that you are having trouble setting up the credit card processing small business system.

2. All the rates are conveniently the same

Thanks to the marketing plans of the big players like PayPal and Square, which are not essentially credit card processors but aggregators, the rates for credit card processing can vary significantly and widely. For example, consider that the average debit rate is 1.35%; Square’s rate is 2.75%, and PayPal’s rate is 2.7%, thus customers will have to pay an extra 1.41% and 1.35% respectively using these 2 services. Some credit cards, like foreign rewards cards, also get charged well over 4%. These companies end up getting profits as the mobile customers lose money. As a result, you should always read the fine print before starting online credit card processing.

3. I already have a point-of-sale system — the hassle isn’t worth it

Mobile payments are offering more flexibility to reach out to the customer than ever before. Salespeople are no longer tied to counters and a cash register so as to finish the sale. This flexibility can mean the difference between a lost sale and revenue. Mobile payments also have all the latest technology to log revenue, track sales, fight chargebacks, and also analyze performance easily and quickly.

4. It raises the risks of fraud

Fraud is always a concern with online credit card processing and with merchants that accept credit cards. However, since the data is not stored on the device for Square and other popular service providers, the data is usually stored on their servers. By doing so, the risk is lessened. For instance, there is no need for you to fear any of your employees walking away with your tablet and downloading all of your customer’s information from the tablet. With online credit card processing, there are also no heightened fraud risks for data loss if a mobile device or tablet is ever stolen.

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5. Credit card info is stored on my mobile device after a transaction

Good mobile developers don’t store any crucial information on mobile devices. That information should only be transferred via an encrypted and secure handshake between the app and the processor. No critical information should be stored or even be left hanging around after the transaction.

6. Mobile processing applications are error-free

Data corruption glitches usually happen on the wireless mobile devices during credit card processing. A merchant who is using mobile credit card processing applications has to be more diligent so as to review their credit card processing small business transactions. Mobile technology is always fantastic when it works.

7. “If we build it, they’ll come.”

Many wallet providers usually believe that if you just build a new mobile payment technique into the phones, then consumers will certainly adopt it as their new wallet. This normally includes proponents of QR codes, Bluetooth, NFC technology, and other technologies. However, given that very few merchants have the point-of-sale systems to accept such new types of technologies, consumers haven’t adopted them. Currently, only 6.6% of merchants can accept NFC technology and even less for BLE technology or QR codes, hence there’s an extremely slow adoption rate. In simple terms, the new solutions aren’t convenient and they do not replace the consumers’ existing wallets.

8. Wireless devices are generally unreliable

Reliability is often brought up simply because many businesses are wary of the fully wireless setups. Even though this is partly justified, they are still very easily mitigated — with a separate Wi-Fi network solely for POS and payments, for instance. With the right network equipment, device, card processor, and software, reliability should not be an issue in online credit card processing.

9. Mobile wallets are about to happen

Mobile wallets aren’t about to happen everywhere, but there have been many strides, and more so in developed markets like the United States. It took close to 60 years to put in the banking infrastructure that we have today, and it will take several years for the mobile wallets to attain critical mass worldwide.

10. The biggest business opportunity in mobile payments space is in the developed markets

While most activities and investments in the Mobile POS space take place today in the developed markets (Western Europe and North America), the largest opportunities are actually in the emerging markets where majority of the merchants are informal and cannot get a merchant account to accept credit cards. Debit and credit card penetration is higher within developed markets, but the informal merchants account for most of the volume of payments in the emerging markets, and all these transactions are still conducted in cash nowadays.

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Posted on May 5, 2023