Credit Card 101: Cashless society from a retailer’s perspective

Author: Kim Tallman, Director, Strategic Engagements, Arbela Technologies

Every day, we swipe, tap, insert a chip, or use an app for contactless payments in brick-and-mortar stores, enter and store credit card information on e-commerce sites, and essentially have a way to pay for just about anything, just about anywhere, and all the time.

Swiping, chipping, and tapping have become increasingly natural as we move towards a cashless society. Even wallets have fallen by the wayside as many people leave home with nothing more than a credit card and ID along with their phones. It’s not just the convenience, either. It’s part of most consumers financial planning, as credit cards allow us to defer payments, amass “points” for future purchases, and more.

However, many retailers are struggling to keep up with the pace at which consumers demand convenience and cashless options. So we present Credit Card 101 for retailers, a breakdown of the basics baked into the struggle (and details on a possible solution).

Let's start with the basic lingo of Credit Card 101:

• Issuing bank = consumers' bank
• Acquiring bank = merchants' bank
• Terminals = hardware where card is swiped, tapped, chip inserted
• Processor = a “middleman” between the merchant and the acquiring bank that handles processing transactions, usually a third-party company
• Gateway = communication tool between your website or back-end financial systems (e.g., ERP) that securely passes information to the processor

And now a few more advanced terms, let’s call this Credit Card 102:

• PCI Compliance = information security standards (mandated by major credit card companies) to protect consumer data and reduce risk
• Tokenization = an alpha-numeric ID that represents the credit card information to securely pass data
• Omnichannel = integrated touchpoints for seamless consumer experiences, such as buying online and picking up in a store
• NFC (Near Field Communication) = technology used for contactless payment forms across a short distance (e.g., “tap and pay,” wherein a card is tapped to a terminal for payment)

Issues the retailer should consider

Fees. Different processors have different fees and these may vary by credit card type. For example, American Express typically has a higher per-transaction fee, therefore the card has added benefits which make it advantageous to the consumer, but not to the merchant. (You may recall those Visa ads leveraging this fact, stating about some businesses, “…and they don’t take American Express. Visa: it’s everywhere you want to be.”)

Card present versus card not present. Think of this as swiping a card versus keying in a credit card number. Good examples of this are products bought online but picked up in store. How will you, for example, verify the buyer or purchase when the card is not present? This can incur different fees from the processor per transaction as well.

PCI Compliance. Businesses can incur fines and have some liability if they are not aligned with PCI compliance rules, such as how they handle storage and communication of credit card numbers. Having a basic understanding of this is important and security around it to facilitate protection of consumers' data.

Processor Rules. Authorizations of a credit card transaction may have a limit on how many days it can be stored before it expires. As an example, an online sale may have a 45-day lead time on the shipment of the product. You decide to pre-authorize credit cards for the sale, but not actually settle the charge until the product ships. If the processor only allows for a 30-day pre-authorization, the 45-day settlement will be rejected and the card must be re-authorized.

Card Requirements. Requirements vary by processor or by country/state/local regulations on requiring more secure transactions such as TAP, Chip Read, PIN, Signature. Understand what is required before assuming that cards only need to be swiped.

A simple solution for unified commerce

Successful retailers recognize that credit card processing needs to connect and integrate into their overall technology infrastructure. Microsoft Dynamics 365 Commerce (formerly called Dynamics 365 Retail) was developed as an end-to-end retail solution delivering unified commerce across all channels encompassing sales, mobility, intelligence, and productivity to help retailers and workers achieve more in a cloud-first, mobile first way.

When used along with your ERP system (such as Dynamics 365 Finance), it addresses the processes involved in credit card purchasing, helping to ensure seamless user authentication with integrated payments and OpenID integration.

You can also enable customers to configure products online, access and customize services through portals, and increase loyalty by empowering users with the flexibility to better manage their own purchasing processes and relationship.

Whether you’re new to processing credit card payments or have been processing credit cards for decades, Dynamics 365 Commerce provides a set of tools that will make it easy for you to create the ideal purchasing experience for every customer. And that’s a true win-win.

Questions about a custom credit card processing solution for your business? Want know more about Dynamics 365 Commerce? Contact us.