Ecommerce and RetailMobile and Tablet Marketing

Credit Card Processing and Mobile Checkouts Explained

Mobile payments are becoming commonplace and a solid strategy for closing business faster and making payment processes easier on the customer. Whether you’re a ecommerce provider with a full shopping cart, a merchant with mobile checkout (our example here), or even a service provider (we use FreshBooks for invoicing with payments enabled), mobile payments are a great strategy to bridge the gap between the purchase decision and the actual conversion.

When we first signed up, we were absolutely stunned at how difficult it was to get up and running and understand all of the fees associated. That was a few years ago… now all-in-one solutions like Bluepay are simplifying the process and the fees associated with accepting credit cards. They provided some guidance for our readers here.

Any company that accepts credit cards has an opportunity to reduce expenses by shopping around for credit card providers and payment processing systems. There are many different processing options on the market, each with different features and costs. Look for one that offers high security, high convenience, affordable rates, and most importantly its effectiveness. Payment processors vary in value when it comes to the size of an operation, the volume of payments you’re processing and your ability to build brand recognition among potential customers. Once your payment processing systems are in place, you won’t have to worry — you can focus on your product and craft. Kristen Gramigna, CMO of Bluepay.

Mobile checkouts work by using the merchant’s mobile device to transmit credit card sales information, authorize the card, and send a receipt. Using a mobile merchant account, the sales are electronically transmitted to the clearinghouse and the vendor gets his or her money in just two or three days. That’s a big improvement on the nearly 30-day lag time involved with manual credit card slips. Off-site vendors can issue refunds easily, too. The charge usually comes off the customer’s card within 24 hours.

Mobile credit card processing gives businesses the freedom to get out from behind the sales counter and go where their customers are, whether it’s at a county fair, a street festival, a food truck or even the showroom adjacent to your typical checkout. The ability for vendors to accept credit and debit cards, wherever they may be, is transforming Main Street and the way Americans shop.

Payment Gateway vs. Payment Processor

Payment gateways and payment processor are two key links in the payment processing chain. As a business owner, you’ve probably heard these terms and wondered what the difference is. There are four parties involved with every credit card transaction:

  1. The merchant
  2. The customer
  3. The acquiring bank that provides the merchant’s processing services
  4. The issuing bank that issued the customer’s credit card or debit card

The role of payment processors and payments gateways differ, yet each is a vital component in accepting payment online.

  1. What Is a Payment Processor? – To accept credit cards at your business, merchants set up an account with a merchant service provider like BluePay. The payment processor executes the transaction by transmitting data between you, the merchant; the issuing bank (i.e., the bank that issued your customer’s credit card); and the acquiring bank (i.e., your bank). A payment processor also typically provides the credit card machines and other equipment you use to accept credit card payments.
  2. What Is a Payment Gateway? – A payment gateway securely authorizes payments for e-commerce websites. Think of it as an online point-of-sale terminal for your business. When you sign up for a merchant account, your provider may or may not offer a payment gateway.


Payment Processor vs. Payment Gateway: Which Do I Need?

The most common use of a gateway is an ecommerce store on the internet. If you’re not an e-commerce business, you may not need a payment gateway. A basic merchant account may be best. Look for a merchant account that has reasonable payment processing rates, 24/7 customer service, and PCI-compliant (the standard for credit card security) processing.

On the other hand, a payment gateway is probably in your future if you have or are planning an e-commerce site. Not all merchant account providers have a payment gateway. Some providers use a third-party payment gateway, which can be a hassle when you have a dispute. Who do you contact when you have a problem?

Gateway and Processing Fees

One reason that organizations put off the implementation of a credit card donation system is because of the confusing fees. It can be tough to get your head around all of these different fees and determine whether or not they are appropriate for your specific organization. The following list includes the most common types of credit card fees.

  • Merchant account fees – A merchant is any individual or company that processes credit card transactions. As such, a processing account is often referred to as a merchant account. All payments are made through this financial account.
  • One-time fees – Most merchant accounts come with some sort of initial setup fee. This fee may be referred to as a gateway setup or application fee. Some companies also require payment for the software or other equipment that is used for the transaction processing. Are you using a web-based system or are you leasing your equipment? If so, you may have a monthly fee instead of a one-time fee for the system or equipment.
  • Monthly account fee – Almost every merchant account comes with a monthly fee. This fee may be referred to as an account, statement, or reports fee. Typically, monthly charges are in the range of $10 to $30. In addition to monthly fees, some accounts also require a monthly minimum fee.
  • Transaction fees and discount rate – Each transaction often has two processing costs… an item fee (generally this fee is in the range of $0.20 and $0.50) and a transaction percentage. This fee is referred to as a discount rate. Discount rates vary significantly for different processors, typically in the range of two to four percent. The type of credit card and processing method both play a role in the discount rate. The majority of the discount fee goes to the credit card issuing company (i.e. Visa, Discover).

The difficulty of comparing cards and services

It can be very hard, if not impossible, to compare fees for varying companies because most of them do not present their fees in a simple format. I’m beginning to think that most gateways and processors do this on purpose!

As an example, sometimes discount rates are broken down into the interchange fee and the charge for the organization managing the various transactions. Additional factors that can affect the transaction fee include the following:

  • The type of card that is used (i.e. credit card vs. a debit card)
  • The processing method for the transaction (i.e. keyed in vs. swiped)
  • Fraud prevention tests (i.e. is the same address used for both the credit card billing address and the particular transaction?)
  • The associated risk of the transaction (i.e. most companies believe that transactions completed without a physical card swipe are more risky)

BluePay is an all-in-one provider, they have their own payment gateway that is available to merchant account holders. The BluePay gateway can be used in a retail environment with a swipe reader. Bluepay is also integrated into several POS systems and can process PIN debit transactions. Using a payment gateway to securely process integrated payments can reduce errors, speed up transaction processing, and ease reconciliation.

If you don’t want to invest in terminals, or if you don’t have an ecommerce website, you can also use the BluePay gateway’s Virtual Terminal to process transactions so long as you have an Internet connection.

NOTE: We were not paid, nor do we have any relationship with Bluepay… they were just nice enough to provide all the info we needed to get this blog post!

Douglas Karr

Douglas Karr is the founder of the Martech Zone and CEO of DK New Media. Douglas has helped dozens of successful MarTech startups, has assisted in the due diligence of over $5 bil in Martech acquisitions and investments, and continues to assist companies in implementing and automating their sales and marketing strategies. Douglas is an internationally recognized digital transformation and MarTech expert and speaker. Douglas is also a published author of a Dummie's guide and a business leadership book.

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