21 January 2020
7 minute read
We believe in keeping payments simple and are passionate about keeping our customers, partners and the wider payments community well-informed and equipped with the tools and information to make better business decisions. So, we've answered some of the most common questions we get asked - let us know if we've missed anything!
As we soar into a new decade there's no better time to answer some of the payment industry's most common conundrums.
We believe in keeping payments simple - because business can be complicated enough! - and are passionate about keeping the payments community informed and equipped with the tools and information to make better business decisions.
Here are our top 10 payments questions, answered by our local team.
1. How do I accept credit card payments online?
You'll need to engage with a payment processor, like Bambora, who can help implement a system that's best for your business. There's a couple of primary ways businesses can start taking payments on their website:
Through a Payment Gateway:
Traditionally, to accept credit and debit cards online, merchants need three things:
- An acquiring bank
- A merchant account (MID)
- A payment gateway (like Bambora)
When a shopper makes a purchase through your website, the payment gateway connects your store to your merchant account and processes the transaction, being the middleman between your account and the shopper's card issuer.
Through a Payment Facilitator:
As a merchant, if you choose to take credit and debit cards through a payment facilitator, you'll need:
- A payment facilitator (like Bambora)
Payment Facilitators (or PayFac as we like to say) take care of everything. You won't need to open a merchant account or have existing relationships with banks and acquirers. It takes a simple API integration into your website to get your payments up and running - no further admin needed. Learn more about the benefits of payment facilitation here.
2. OK, what's the difference between a Payment Gateway and Payment Facilitator?
This is one of our biggest questions. Here's how a payment gateway and payment facilitator (payfac) differ:
- Typically used by large, enterprise businesses who have existing relationships with banks and acquirers
- The merchant needs to open (sometime multiple) merchant accounts
- The payment gateway links the customer's bank or card brand to the merchant account so funds can be transferred between these accounts
- Typically used by small to medium businesses
- The Payment Facilitator has a contract with an acquiring bank and onboards merchants onto a sub-merchant platform. The merchant signs up under the PayFac's master account and the PayFac takes care of setting up the merchant's MID.
- The PayFac acts a single point of entry into the payments network
Keen to find out more? Head to our Payment Gateway vs Payment Facilitator blog post.
3. What sort of bank account do I need to take payments?
You'll need a merchant account. It allows you to accept payments via credit or debit card. It's where the final settlement of funds takes place and the type you get depends on the size of your business.
Large businesses usually opt to use an Independent Sales Organisation (ISO) merchant account because it gives you access to full control and customisation of payment processing.
Smaller businesses might decide to have an aggregator merchant account which is when, for example, a payment facilitator gives you all the services you'll need from a merchant account except it sits under their master merchant account.
Check out our Third Party Payment Processors blog for more information on taking payments.
4. How does my business become PCI compliant?
PCI is mandatory for all organisations that accept, transmit, or store cardholder data. But requirements differ based on a business' transaction volume over a 12-month period from Level 4 (under 20,000 transactions) to Level 1 (over six million transactions).
The number of payments touch points your business uses will also change your compliance scope - e.g. you might accept payments as well as MOTO.
Becoming PCI compliant an any level involves strict annual reporting, network scans and completion of various compliance forms. The forms can be lengthy and vary in technical details depending on the level you need.
Some payment processors, like Bambora, offer PCI compliance assistance and solutions to help merchants automate the process. Generally, merchants are able to leverage our Level 1 PCI compliance - a big time saver and super secure solution.
Find out more about become PCI compliant.
5. Is switching payments providers easy?
We can only speak for ourselves, but in theory, yes switching providers should be easy! When you're looking for a new payment processor, check for a couple of things like if they offer easy onboarding and if they integrate with all of New Zealand's major banks.
Bambora integrate with all major New Zealand banks and offer a superior, dedicated onboarding service for merchants looking to make the switch.
6. What is a transaction fee?
A transaction fee is an expense a business must pay each time it processes an electronic payment for a customer transaction.
Transaction fees: are made up of an interchange rate, an assessment fee and payment processor fees. Transaction fees come in two forms: 1) percentages (e.g. 3.19%, 0.25%), or 2) per-item amounts (e.g. $0.50, $0.0195). Often, both forms are charged on a given transaction.
Let's look at a few other common payment processing fees:
Interchange rate: a fee that the issuing bank charges the receiving bank every time a customer uses their credit card.
Incidental fees: are fees that you're charged by your payment processor or merchant account provider as a result of particular occurrences - like in the case of a chargeback or non-sufficient funds.
Assessment fee: this is when a card network charges a fixed fee, on top of the interchange rate or reimbursement, for every transaction.
When you sign up to a payment processor like Bambora, you receive full fee transparency.
7. Are there different rates or fees associated with different types of credit cards?
Yes. In every business transaction involving credit cards, processing fees are applied. Fees are also impacted by whether the card being used in the transaction is a debit or credit card.
Furthermore, the type of credit card is also important. Mastercard, Visa, American Express, and Discover are the four major credit card networks, and they all charge slightly different interchange rates.
8. How long do online payments take to process?
Payment processing works a little differently to peer-to-peer payments. These can be almost instantaneous.
There are a number of entities and factors involved in online payment processing: the cardholder, authentication and fraud checks, the payment processor, the card network, the acquiring bank and the merchant account.
Payment processing times are dependent on a few factors like currency, time of transaction and card type. Factors like card authentication and fraud checks via the payment processor can occur in seconds, though settlement of funds can take up to three business days.
9. Are online and mobile payments different?
In terms of making online payments, mobile and desktop payments are very similar for the end user. But in terms of payment systems, there are some big differences.
You can hop onto your mobile phone and make a payment using your browser (e.g. Safari) just like you would on desktop. For instance, manually inputting card details into the checkout and submitting.
Or you can make a payment within a mobile app provided there's WiFi or 3G/4G network signal. Or follow a link to pay invoice via mobile.
The difference is that mobile payments via browser need to be responsive. The page needs to scale easily and function according to the device the shopper is using.
In-app payments require Mobile SDK capability where the payment system is designed for mobile application use.
Mobile payments can also be used in a peer-to-peer context (usually during the transferring of funds for domestic accomplishments like dinners out) which could look like a bank to bank transfer.
Mobiles can, of course, be used instore instead of cash, too. This is where digital wallets (NFC payments) come into play like Apple Pay and Google Pay. These usually require fingerprint verification.
Read more about Optimising Payments Over Mobile Channels.
10. In the future, what's going to be our best bet at authentication: our fingerprint, our iris or our face?
How far we have come from the humble signature. Each of the different methods of biometric identification have something to recommend them: iris, retina, face, palm, voice, fingerprint.
But the reliability of a biometric modality depends on various factors like current environment, age, ethnicity, and skin integrity.
Fingerprints may be the most popular modality, but iris recognition generally gets the highest marks for accuracy as it rarely changes during a person's lifetime. It is leading the race as the future of biometric recognition but watch this space...
If you have a question that we haven't answered, please reach out to one of our team who will be very glad to assist you.
About the author
Victoria Galloway has been writing and producing in the payments and eCommerce space for a number of years in the UK, Australia and New Zealand.
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