Understanding the Cost of Merchant Card Service’s
January 23, 2018
5 reasons to Accept Credit Cards
January 23, 2018
Show all

Evolution of Payment Processing

 Payment processing systems have evolved from simple cash drawers into sophisticated transacting machines. Consumers now have a lot of options when it comes to paying, and business owners can take a lot more payment types. This article answers the question, “What are the most popular electronic payment types being used today?”

Magnetic Stripe

Conventional credit cards (which are currently being phased out by EMV chip cards) are still a common payment method for consumers. The stripe on the back of the card is made up of tiny magnetic particles encased in a plastic film. As the merchant swipes the card through a reader the software on their point of sale terminal dials a stored phone number into a modem. The terminal is calling the credit card issuer and is checking to see if the card is active and valid. This works similarly with pin pad transactions.

Cons: The way magnetic stripe cards are made it is easy for the card to be copied by thieves. This is why standard magnetic stripe cards are being replaced by more secure EMV chip cards.

EMV Chip Cards

EMV stands for “EuroPay, Visa and Mastercard.” These cards utilize technology that make them harder to forge or steal. Sometimes they are called “chip and pin” cards, because they use both of those features to add security. Some issuers provide “chip and signature cards.” When you use an EMV card you must insert the chip, then type in your pin (or sign.) Every transaction is encrypted by the computer chip embedded in the card – it basically scrambles the credit card information. This is another powerful safeguard against theft. In October 2015 business owners became liable for fraud caused by accepting magnetic stripe only cards, which is why many larger credit cards issuers began sending out new customer cards with EMV chips earlier this year. The change is still in process, so don’t worry about your older cards not being accepted at your favorite stores.

Pros: More secure than conventional magnetic stripe credit cards. Has been the standard in Europe for many years

Near Field Communication (NFC)

Smartphones, smart devices, and some credit cards can transmit data with just a tap. Near Field Communication, also called “contactless payment”, or just NFC for shot, works by sending radio data from the user’s device to the payment terminal. NFC was designed similarly to EMV, with a chip inside the device controlling security and encrypting the transmitted data. Many retailers have NFC ready terminals. Consumers with phones that are compatible with Google Wallet can use them, as can the new Apple iPhones.

Pros: Use your mobile device to pay. No need to worry about losing physical cards

Cons: Consumers who use NFC still need to worry about losing their phones.

Apple Pay

>Apple pay is just NFC technology elegantly packed inside iOS. Consumers can pay with their iPhone, Apple Watch or iPad using Apple’s native payment functionality. Because of Apple’s broad consumer reach many 3rd parties (think coffee shops, pharmacies, grocery stores and retail stores) have paired with Apple to connect their rewards programs and gift cards. This gives consumers more control with where and how they pay.  Many apps have started accepting Apple Pay as well, which lets consumers pay for in app purchases without having to fish out their physical credit cards.

Pros: Secure NFC payment method. Familiar user experience for Apple users.

Cons: Consumers who use NFC still need to worry about losing their phones.

Each of these payment types can be accepted by solutions provided by NPS. Are you a business owner interested in learning more about taking different payment types? Give us a call at 1-866-513-2063.