Constantly evolving technological advancements are shifting the credit card processing realm, and businesses rely on bank services in this realm to survive and thrive. In recent years, mobile and online banking have become expected services for merchants. Europay, Mastercard and Visa (EMV) cards, otherwise known as “chip” credit and debit cards, are the new standard. Moreover, as more Millennials enter the business world, phone payments are slowly – but surely – becoming commonplace.
These new developments have left some business owners in a cloud of credit confusion. Those who are unaware of the intricacies of the industry can be left behind quite easily. New Jersey Business speaks with six local experts about the current state of banking merchant services to gain valuable information about both practical and technical credit card processing strategies.
New Trends in the Industry
The establishment of smartphones and tablets in the business realm has forced banks to quickly adapt in order to stay competitive.
“In the merchant processing space, we’ve seen an influx in smartphone and tablet solutions,” says Mike Dinneen, the director of marketing, communications and investor relations for Sun National Bank. “These mobile processing solutions provide retailers and restaurants with more flexibility for accepting payments. In our region in particular, seasonal merchants in the tourism or farming industries can take advantage of these technological advances, and they don’t have to rely solely on cash receipts anymore.”
Laurie Liebers, the head of treasury management for Peapack-Gladstone Bank, echoes Dinneen’s thoughts and provides an insider’s look at how banks are addressing the ever-changing marketplace.
“The whole banking world, and the way we serve our customers, is changing dramatically. We have to keep up, and the merchants have to keep up with the demand of the marketplace. It’s kind of like, ‘you snooze you lose,’” Liebers says. “If you don’t have the technology, you may not get the sale. It used to be if you saw a vendor at a street fair, you could only pay in cash. Now, everybody has the mobile app on their phones or on their iPad and they’re able to take credit cards.”
And while that’s extremely convenient for vendors, it still leaves the door open for fraudulent charges as mobile credit card solutions aren’t compatible with EMV cards yet. However, the EMV cards were introduced to fight fraud during in-store purchases, and it’s working.
“As a bank, even with debit cards, we’ve seen a tremendous decrease in fraud since the chip cards came out,” Liebers says.
EMV cards decrease the odds of fraud occurring by transmitting a unique code every time the card is used, drastically reducing the odds of fraud occurring. With the old credit cards, a fraudster could take the number, the expiration date, or even the security code on the back of the card and make a fraudulent purchase. It’s important for merchants to keep in mind that there has been a change in liability after the implementation of the chip cards. Now, if you accept a card that has a chip and you don’t have a chip reader, your business is forced to “eat the loss” if that purchase is found to be fraudulent.
Preventing Fraud and Increasing Security
While the chip cards are doing their job, banks are not getting comfortable, because criminals evolve as the technology does.
“The constant enhancements to fight fraud are necessary things that we have to do,” says Investors Bank Cash Management Services Manager Dominick Petramale. “As fraudsters continue to develop tools, banks continue to work with their merchants to enhance fraud-fighting tools.”
According to Petramale, staying vigilant and acting proactively is the biggest key to credit card security for a business.
“No one is concerned about security until they get hacked. That’s really across the board with any product that I work on. If you think about it, if you’ve never had your credit card number stolen, you’re not that concerned about it, but as soon as your card gets stolen and you personally get a notice from whoever your credit card provider is, you think a little bit differently,” Petramale says. “The best way to be proactive is to ensure all of your security and virus anti-malware is up to speed. And for a business, if something seems too good to be true, it probably is. You know, if someone is willing to pay top dollar for one of your products and it’s not market value, and they want to order in bulk, there’s usually something behind that.”
The Internet is making things easier, and its effects are no different when it comes to banking merchant services.
“Internet-based and mobile apps have become a huge convenience for merchants, because they make accepting and processing payments on the go fast and efficient. They continue to become even more advanced to keep up with consumer demands,” says Priority Payment Systems Local’s Chief Operations Officer Angelo Mendola.
However, it’s important to keep in mind that sometimes online may not be the best option. Many New Jersey businesses still operate with a “brick-and-mortar” mindset, Mendola says, noting that it’s crucial for credit card processors to remain versatile.
“Since we work with a wide range of industries between hospitality, retail, auto sales (and the list goes on), an online store is not always possible. Many of the local businesses we work with, that still have brick-and-mortar stores, could easily make the switch to online, but choose not to,” Mendola says.
There are more fees associated with online and mobile solutions, but as Dinneen explains, that isn’t necessarily a bad thing, especially for smaller businesses.
“Many of the emerging mobile and tablet solutions are moving to a ‘per transaction’ fee model. This is ideal for seasonal merchants as well as youth clubs, sports teams or school fundraisers,” he says. “It allows more micro merchants, seasonal businesses and nonprofit organizations to take advantage of the security, reporting and overall greater payment options that card acceptance can provide, without a long-term or fixed-fee commitment.”
As for established business, there are fees that come along with traditional terminal and online solutions, but there are benefits that come along with the process as well.
“Typically, there may be a fixed monthly fee for a traditional terminal or online checkout solution, and also a variable fee as a percentage of sales,” Dinneen says. “However, the benefits of a merchant services processing platform also include value-added sales reporting, and inventory and risk management tools, so it’s important to take that into consideration when pricing out a merchant solution.”
All of these services have required banks to change the way they operate. With the adoption of all the online and mobile features, banks now have to budget for things that they simply didn’t address in the past, as Kearny Bank Director of Marketing Eric Kesselman explains.
“It’s changing everything. Banking is no different than any other industry that is modifying the way it does business because of technology. Online is where they know they have to be,” he says. “I’m the director of marketing, so my digital budget is now the largest component of my entire marketing budget, whereas years ago, you never heard of digital, and print was everything.”
Educating Yourself as a Business Owner
While credit card processors do provide merchants and business owners with all of the information they need, it never hurts to do some research on your own. However, some people simply don’t have the time.
“Everybody wants to understand the interchangers. Mastercard and Visa dictate pricing, and then it’s a matter of how much will go on top of that,” Liebers says. “You know, a restaurateur is worried about getting ingredients, putting together a menu and attracting the people. They’re not going to be experts in how credit card processing works, so they look to their sales guy to help them understand and operate efficiently.”
Yet sometimes, even the help of a salesperson isn’t enough. That’s where a company like Merchant Advocate can help business owners. The company helps merchants negotiate with their current processors, and as Chief Operating Officer Danielle Bottari Cohen puts it, “we help the processor maintain a client, and also help the merchant save money.”
For example, many businesses were confused by the implementation of the EMV terminals, and Merchant Advocate played a mediator role during that time for many businesses.
“In October 2015, all merchants were supposed to be EMV compliant, meaning they had to have the appropriate equipment. At that point, most of the merchants didn’t really understand what that meant,” she says. “They were being overcharged for equipment and the entire process became overly complicated, rather than simplified, which is what it should have been.”
The bottom line is that it always pays to be informed, especially in the world of banking merchant services. The best approach to credit card processing is to be both comprehensive and proactive, to which these experts have attested.