The Fast-Evolving World of Payment Processing

When choosing a payment processing system, operators should consider hardware, software, processing fees and quality of service.
Consumers now expect a quick and efficient payments experience that limits face-to-face interaction.

By Tracy Morin

From QR codes to kiosks, from pay-at-the-table to smart terminals, the world of payment processing, like anything tech-related, continues to evolve with the times. And, when you throw the COVID-19 wrench into the works—with buzzwords like contactless and curbside turning from add-ons to essentials seemingly overnight—the picture can get even more complex.

Whether you need guidance on the basics or fast-evolving intricacies, look no further. We tapped payment processing experts to sort through everything payment-related in simple terms.

The Four Elements

According to Nancy Decker Lent, founding member and VP of account executive success at Park Place Payments in Woodland Hills, California, operators should consider four elements when choosing a system:

Hardware involves an up-front cost for the actual terminal. A simple pizzeria may not need an elaborate POS system; it may be able to process transactions with a countertop or smart terminal. Plenty of these are WiFi-enabled and can be walked to a table.

If you need a POS system, the second element is the software, which manages inventory, sends orders to print in the kitchen, tracks table seating or reservations, etc. The software is a recurring cost, so make sure you fully understand what the cost is, what features it includes, and whether or not those features match your business needs.

Processing fees can include application fees, statement fees, PCI fees, security essentials, monthly minimums and more. Carefully review any and all fees included in the proposal before you make a decision.

Finally, consider service. The ability to quickly get a person (who knows your business) on the other end of the phone when your system is down and cannot accept payments is priceless. You also want to consider the other levels of service a payment processor offers. For example, are you getting proper next-day funding without having to pay a significant fee? Will you get help with PCI compliance? Are you protected from fraud, or will you be assisted if there is a data breach?

“You need to look at price, technology and service and to find a partner,” Decker Lent concludes. “With a little bit of education, you can make the best decision and find the right solution for your business—and it may not be the shiniest or best-known solution.”

“Consumers now expect a quick and efficient payments experience that limits face-to-face interaction. While making payments was once an afterthought, the payments experience has now become an integral way to ensure consumers feel comfortable visiting and returning to a business.”

— Doug Mearkle, TD Bank

Type Casting

Meaghan Brophy, retail analyst at New York-based Fit Small Business, notes that there are several types of processing available:

Online ordering and payment can be added to an existing website or built with a white-label solution or through a third-party app.

Building a branded app can be an effective solution for pizzerias with multiple locations or a large pickup and delivery customer base. Customers can order and pay at their convenience—and branded apps offer pizzerias additional tools, like customer accounts with saved information, loyalty programs and push notifications.

Self-service tech eliminates the pain point of customers waiting for checks and can speed up the payment process and overall turnaround time. Fast-casual pizzerias might use kiosks for efficient ordering and payment, while full-service pizzerias can choose tabletop options.

Handheld POS processors can be used by servers tableside to create a more efficient checkout process. Customer cards are charged right at the table, and customers can still use near-field communication (NFC) contactless payments and enroll in loyalty programs. Handheld options are also ideal for curbside or other outdoor ordering and pickup.

QR code payments gained renewed popularity last year, as many restaurants adopted this technology for contactless menus. For QR code payments, the code can be printed on customer checks, which eliminates the need for servers to bring payment cards back and forth.

In the handheld category, Melissa Johnson, payments analyst at Merchant Maverick in Orange, California, notes that the advent of “smart terminals” allows servers to send an order to the kitchen or bar while standing next to patrons at the table. “Smart terminals also make it easy to seamlessly split checks and take payments on the spot,” Johnson adds. “As a bonus, they are almost always equipped with NFC so that customers can use the ‘tap to pay’ feature on their smartphones or smartwatches.”

COVID-Era Contactless

Doug Mearkle, head of U.S. merchant services sales for TD Bank, headquartered in Cherry Hill, New Jersey, notes that consumer payment preferences have changed due to COVID-19, and restaurant owners should pay close attention to these evolving preferences. “Consumers now expect a quick and efficient payments experience that limits face-to-face interaction,” Mearkle notes. “While making payments was once an afterthought, the payments experience has now become an integral way to ensure consumers feel comfortable visiting and returning to a business.”

Mearkle explains that merchant payment offerings like mobile, online and contactless payments help enhance consumer confidence because consumers are able to quickly make a payment without the need for shared devices or cards. “These payment offerings also benefit the business because many merchant offerings do not hold back a percentage of transactions or delay fund deposits,” he says. “This is very important in the current economic environment, where liquidity is crucial, especially for restaurants that may be operating at partial capacity.”

Mearkle recommends a full-service merchant solutions program, which allows businesses to gain a more holistic view of the fiscal health of their business by syncing all payments apps across devices in real time, allowing businesses to engage customers and manage employees while viewing real-time inventory, order tracking, employee scheduling and reporting.

Quick Tips

Johnson notes that you can get a POS system and payment processing from a single provider, or you can choose each one separately. “But, in either case, you should absolutely make sure your payment system supports EMV,” she advises. “NFC support for tap-to-pay is nice, but keep in mind that not all smartphones support it. You also need to make sure that your setup has an intuitive system for managing tips, especially with credit card payments.”

In addition, Brophy recommends keeping in mind the following when choosing a payment solution:

Find the most affordable option for your business. Competitive rates are important—but the most affordable option will vary for each business, depending on your overall sales volume and average order value. For example, a slice shop with lower average tickets might be better suited to a processor that has a flat-rate percentage transaction fee, whereas a full-service pizzeria may find a flat 15-cent per ticket markup more economical. Also, different types of transactions have different rates: Generally, card-not-present transactions, like online orders, have higher rates than card-present transactions, such as self-service, tableside or handheld POS checkouts.

Choose a solution that offers flexibility. With a POS and payments system that offers a range of hardware and payment processing options, you’re free to take orders however you need to as your business changes and adapts. You don’t want to invest in hardware only to outgrow the system in a few years.

Make sure your technology is compatible. Your POS and payment processor need to talk to each other. Otherwise, no matter what payment method you choose, there will be a huge inefficiency—needing to manually record payments in the POS. For small businesses, Brophy usually recommends choosing one completely integrated system for simplicity and ease of use.

Tracy Morin is PMQ’s senior copy editor.

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