What is a Point of Sale System?
A common question that new business owners ask is, “What is a point of sale system?” More accurately business owners want to know how a POS system can help improve commerce for their business. There are many benefits from a transactional and financial standpoint that new or existing business owners should know. This is specifically true for retail and hospitality businesses where tracking inventory and multiple customers simultaneously is critical for operations. For a basic overview of what a point of sale system is and the three (3) most common configurations be sure to check out our Point of Sale page. For a more in-depth look at restaurant and retail POS along with a look at POS hardware and software check out our series of posts starting below. What is a POS System? POS is an acronym for Point of Sale and is often used interchangeably with the term Point of Purchase (POP) or checkout. However typically when the term POS or Point of Sale is used the user is referring to the hardware and / or software configuration used at the place of commerce. While historically this was the only option, even today it is common to see a basic manual cash register. However with the advent of bank cards and credit card processing, the need for electronic components such as a credit / debit card terminal became necessary. This has led to the development of fully integrated Point of Sale configuration or ePOS setups which today can be anything from a full computer station to an iPAD and custom app. Point of Sale configurations vary widely depending on the application. What is used in a restaurant or retail environment can be very different than what is needed for mobile or online merchants. While the basics are the same, the specific requirements of the merchant can change the solutions drastically. For more information on the different type of point of sale configurations use one of the following links to navigate directly to a POS specific page. POS defined and basic modern configurations – Point of Sale Overview Advanced and integrated solutions – Dedicated Point of Sale Systems For more specific information about point of sale in both a restaurant and retail environment as well as hardware and software applications use the links below. You will also find consumer friendly information on this site including “How to Choose the Right POS” and top brands among other topics. Point of Sale Further Defined (Click Link Below) Guide to Retail and Restaurant POS POS Evolution: Retail and Hospitality Point of Sale Software Point of Sale Hardware How to Choose the Right...
Read MoreThe Merchant Statement Fee
The Fee is not Just for the Paper Every month millions of businesses are charged a statement fee in association with their card processing merchant account. Many ask the question, “Why am I getting charged so much to get a few sheets of paper each month.” Merchant statement fees are commonly $10, $12 even $15 and there is a large misconception that this fee is only related to the packet of paper that summarizes the card processing for the previous month. The truth is that most organizations have an “account on file fee” associated with every merchant account they board. This fee is typically based on how many accounts an ISO (independent sales organization) has with the processor and can be anywhere from $0 to $5. It is also common for sales agents to be restricted by a statement fee “buy rate,” meaning that they can not charge less than say $5. The account on file fee is designed to account for the monthly cost of doing businesses associated with each account, which includes, preparing and sending a paper statement to the merchant, even if they do not process a single card. How to Eliminate the Statement Fee It is common to see statement fees from $5-$15, if you are paying much more than this, call your account representative and find out why. Additionally, most processors and sales organizations offer to remove or reduce the statement fee if the merchant moves to paperless (online) statements. If this is not an option, or if you prefer paper statements, it is likely that the sales organization or agent will reduce this fee should you ask. This is especially true if you have increased processing volumes since the account was first established. An important piece of information to know is that, the two major tools that sales organizations use to protect or keep their merchant accounts are via the statement fee and monthly minimum. These fees are commonly used in calculations for termination clauses. They are also used as ways to guarantee a minimum level of revenue, should a merchant account become dormant for any reason. So do not expect to completely eliminate this fee, however ensure that what you are paying is...
Read MoreCapture, Settlement & Batch
Authorize & Capture: Process Solution The authorize capture process for charging credit cards is a method that provides both automation and flexibility for the merchant. It is rapidly become adopted by merchants who provide products or services where the price can fluctuate during time of use or there is a delay between order and fulfillment. This is popular among, online merchants, gas stations, travel as well as bars and nightclubs. Authorization Capture Definition from Authorize.net “A credit card transaction request to authorize and capture, or settle, funds for a purchase. The payment gateway submits the request to the card issuing bank for authorization and upon approval, will automatically submit the transaction for settlement.” Authorization & Capture Definition from PayPal “Authorization & Capture, or Auth/Capture, allows you to authorize the availability of funds for a transaction but delay the capture of funds until a later time. This is often useful for merchants who have a delayed order fulfillment process. Authorize & Capture also enables merchants to modify the original authorization amount due to order changes occurring after the initial order is placed, such as taxes, shipping or gratuity.” Depending on the business environment and configuration of hardware/software, even if an authorize/capture process is used, a settlement or batch of the transaction may still be required. – To learn about authorizations learn about Authorizations – To learn about settlement and batch continue reading below Settlement & Batch: Clearing Transactions In a basic sense regardless of how a transaction is authorized it must be settled in order for the funds to physically move from one bank account to another. This is typically done in a batch, which can affect cash flow or how quickly funds are deposited in the merchant’s bank account. Settlement from Authorize.net: “For credit card transactions, settlement occurs at the completion of transaction processing between the involved financial institutions and processing entities, and funds for the credit card transaction have been successfully deposited into the merchant’s bank account.” Batch from Authorize.net: “A group of transactions that have been gathered over a certain period of time and are submitted together to the appropriate processing networks for clearing and settlement.” Potential Batch Processes All transactions for a given business day are kept in a queue and batched manually at closing time for that particular business. Transactions are kept in queue but batched automatically at set time such as 11pm or another time when equipment is not in use. Transactions are batched at fiscal close of business 3pm PAC (money transfer deadline for financial institutions) regardless of when physical business closes. Transactions are batched in real time. Each batch process impacts cash flow and fees associated with batching differently. Which process is correct, will vary from business to business and processor to processor. If you are unsure which process is correct for your business please contact us at...
Read MoreHow to Process a Card for Payment
Processing a card payment may seem fairly simple when only viewing the physical act of swiping a debit or credit card through a terminal or inputting the card numbers into software. The truth is that once set up correctly, processing payments should be simple, error proof and allow employees to focus on serving the customers. The trick then lies in having the correct professional setup that matches the business needs, because below the surface the actual electronic process of authorizing and settling credit cards is far from simple. The Two Parts to Card Processing: Authorization & Settlement In the traditional sense, there are two parts to every credit or debit card transaction. This includes an authorization and a settlement. Both steps are required in order to charge a bank card, and depending on the hardware, software or service company, terminology can vary slightly so it is important to understand the fundamental steps in the process. – To learn about auth/capture and settlement see our Capture and Settlement post – To learn about authorizations continue reading below Authorization Transaction Authorization from Wikipedia: “Authorization hold (also card authorisation, preauthorization, or preauth) is the practice within the banking industry of authorizing electronic transactions done with a debit card or credit card and holding this balance as unavailable either until the merchant clears the transaction (also called settlement), or the hold falls off.” An authorization in simple terms is communication with the card issuing bank (ie Chase, BoA, Wells Fargo, etc.) that is looking for approval or denial to run a transaction on the card. Response codes are transmitted that are usually 6 digits and are recorded within the hardware or software performing the transaction. Also if configured correctly AVS and CVV2 codes are transmitted and recorded. These are security measures that are used to protect the financial intuition and merchant from fraudulent activity. It is important to note that when a sale is authorized, the sale amount is placed against available credit or funds and is not actually removed from the balance until settlement is performed. Criteria For Authorization Approval Is the card number valid? Is the expiration date submitted valid? Has the card been reported as lost or stolen? Is there enough available credit or balance on the card? In traditional credit card processing, if all the conditions above are met correctly, the transaction information is held in queue and then must be settled or batched via a manual or automated process at the close of business or other allotted time. There is however another option and is widely used both in online sales and also with gas stations, rental businesses and in the bar and night club industry. This is the process of Authorize and Capture and has been adopted in response to Visa’s initiation of the misuse of authorization fee. – To learn about auth/capture and settlement see Capture and Settlement – To learn about misuse of authorization see Misuse of...
Read MoreMisuse of Authorization Fee
As a follow up to our article explaining Authorization Fees; we cover a Misuse of Authorization Fee in detail below. On October 1, 2009, Visa began to asses a misuse fee of $0.045 for authorizations that are not settled or reversed within certain time frames. These are sometimes referred to as “ghost” or abandoned authorizations. This fee commonly affects gas stations, ecommerce businesses as well as bars and nightclubs. How an Authorization Becomes a Ghost When merchants want to simply validate that a card is not stolen a simple authorization is used. This is common to open a tab, start a pump or initiate an order online. Merchants typically perform a $1 auth but this could be as high as $25 or even a few hundred. Unlike a normal transaction where an authorization is immediately followed with a capture, these types of transactions are “auth only” as the full purchase amount is not yet determined. The problem comes when the settling part of the transaction does not match the original authorization. It is commonly an issue with software that limits matching the original transaction but can also occur in a tab situation when the customer decides to pay with cash. How To Avoid Misuse of Authorization Fees Visa attempts to reduce ghost authorizations because they restrict the cardholders purchase limits and increases decline frequency. In order to avoid ghosted authorizations and misuse of authorization fees, merchants have 10 days to settle an authorization, except for Travel and Entertainment who must clear within 20 days. Merchants can also reverse card present auths within 24 hours and card not present within 72 hours by using the void process. In addition an alternate method to verify cardholder data called “Account Verification” can also be used. This is a $0 request and can include AVS and CVV data for added security. – To learn about authorization fees please visit Authorization Fees – To learn about voice authorizations please visit Voice...
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