The payment processing industry is incredibly simple on the surface, yet when you dig deeper it quickly becomes pretty complex. In this segment we’ll try to summarize the key elements that you’ll need to know so you can make sure you’re getting a fair deal with your payment processing program. If you’d like to become an expert on this topic, however, we recommend that you consider one of the more academic resources available on the Web – mostly written by payment industry insiders and/or the processors themselves.

Basically, the payment processing system consists of:

1. The consumers who make purchases
2. The cards* they use to make the purchases
3. The retailer (you)
4. The banks that loan the consumers the money and pay you when the sale is processed
5. The owners of the brand names and organizations for the cards (i.e., Visa, Mastercard, American Express, JCB, Discover, etc., these are known as the “card associations”)

(* Please note that there are differences between how each card specifically works and we’re generalizing the process for this article.)

In reality, there are two kinds of banks involved:  the “issuing bank” (they issue the cards and interact with the consumer), and your bank (known as the “merchant bank” or the “acquiring bank”).

Further, the merchant bank almost always has some “middle men” to help them with managing the merchants and with the process of selling the merchant on their value proposition. These agents are variously known as:

1. Independent Sales Organization (ISOs)
2. Merchant Serves Organizations (MSOs)
3. Merchant Services Providers (MSPs)
4. Member Service Providers (MSPs)

However, to you they are probably just known as the sales people who “signed you up”. They provided you with your payment terminal and the other things you needed to take credit cards, and they service your account (answer questions, resolve disputes, etc.)

Finally, if you have an integrated payment solution (in other words, your POS terminals and software “automatically” accept credit cards and handle all of the processing), then you will most likely have a component in the process called a “payment gateway”. The payment gateway allows your POS system (like Retail Pro®) to communicate seamlessly with the merchant bank (or to their processing agent, the “processor”).

The reason it’s important to be aware of all of these links in the payment processing chain is that each link has some work to do, some risk to absorb, and some costs for the services it provides. And, as we discussed last time, it’s reasonable for you to pay for the value each of these links provide. However, we also believe that you should be paying a fair amount that is consistent with the value you’re being provided.

In the simplest terms, the sources for your costs for payment processing can be categorized into:

1. Interchange. This represents what the issuing banks charge (as determined by the card associations) for all that they provide (i.e., dealing with the consumer:  taking on the credit risk, managing their payments, providing customer service, etc.; dealing with the merchant banks; dealing with the regulatory organizations; marketing/branding; and any other services they provide). Clearly, this is the lion’s share of the process and ought to represent the bulk of the cost.
2. Communication and processing. This is the cost associated with maintaining the networks and processing infrastructure necessary to ensure that all the transactions are reliable, timely and accurate.
3. Merchant management. This is the cost of maintaining a relationship with you, the retailer, and servicing your account as well as taking on the risk of you staying in business and meeting your obligations.

In the next segment, we’ll discuss in more practical terms exactly what you get charged for on your monthly statement and why.

For more information, please see: http://www.retailpro.com/RequestMoreInformation.php

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Next to the joy that comes from seeing your customers enriching their lives using the products you’ve sold them, seeing their cash in your bank account comes in a close second place! Everybody loves cold hard cash, but clearly other forms of payment have become increasingly popular for your customers. In fact, for many retailers physical currency is becoming an artifact.

Being able to accept non-cash payments seems great, until you see how much the credit card companies are taking from you before they actually make the deposit in your bank account.  And, while they get to keep your money, they don’t seem to do a thing to earn the customer’s business. You do all the hard work and they sit back and rake in the bucks – what a deal for them! In this series, we’ll delve into the reasons why the credit card processors charge what they charge, and how you can make sure you’re paying a fair amount for the services they provide you.

At first glance, it appears that taking cash really doesn’t cost you anything – right? Your customer hands you the cash and you put it in the bank, without anybody else getting their stingy mitts on it. In reality, it does cost you to take cash. You have to maintain your tills, keep your change stocked, and travel to the bank (or hire an armored transport service) to make deposits and withdrawals to manage all of that cash. Further, you take on a number of risks when dealing with cash: robbery, employee theft, mistakes making change, and counterfeits to name a few. Finally, if you were to insist upon only taking cash in your business you would actually make your customers wait longer in check-out lines and subject them to the risks mentioned above – because then they’d  have to deal with all of that cash themselves!

When you work with a payment processor to handle your non-cash payments (including credit and debit cards, gift cards, checks, EBT, and others), they provide a service that saves you money, reduces your risk, and increases customer demand and sales. Another service they provide that might not be obvious at first glance is that they are taking on the risk of establishing and maintaining a credit relationship with the customer (kind of like you granting “store credit” to your customers to help stimulate sales, but you don’t have to determine the customer’s credit worthiness, keep track of charges and payments, and decide how much credit to grant them – or decide when to cut them off!) We all agree that they deserve to be paid something for those things.  The key, however, is making sure that you don’t pay them too much for their contribution to your business and that you keep as much of your cash as possible.

In the next segment, we’ll discuss the components of the payment processing system and how each of those translates into the charges you see on your monthly statement.

For more information, please see: http://www.retailpro.com/RequestMoreInformation.php

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Our last article “Retail Business Intelligence” detailed the importance of retailers having an analytic system in place to make the most of the data their point of sale and retail systems capture. A key business area where a retailer can put this data to good use is within a loyalty program.

A loyalty program at its basic purpose is built to provide the retailer a competitive advantage over other retailers. The next question you ask…How do we get that advantage when nearly everyone focuses on price? The big-box retailers like Wal-Mart can leverage their highly efficient supply chain and enormous buying power to drive prices lower and lower with intention of beating their competition. Though, a loyalty program when targeted appropriately can leverage benefits that extend beyond just price. Customer retention, brand recognition, and exclusivity to a program are but a few examples where a retailer can focus with their loyalty programs. How a retailer adjusts their loyalty programs over time to adapt as customers’ needs, business focus, and competitors’ offerings change will dictate how successful their loyalty programs will be.

When choosing a point of sale system it is important to consider how these loyalty program needs will be met. Retail Pro has leveraged decades of retail experience within its POS and back-office system to create a simple and flexible loyalty application which can be married with the other analysis functionality, like Retail Analytics, Business Intelligence, and Customer Binning and Segmenting. The synergy of these powerful tools provides the perfect mix for a retailer to keep their customers returning tomorrow, next week, next year, and on.

Retail Pro International understands a successful business depends on strong, loyal relationships. Fostering these relationships, and more importantly, maintaining these relationships are key to continuing success as the economy regains its momentum.

This summer Retail Pro International will launch its new loyalty program functionality arming you with the powerful features necessary to build and maintain loyalty with your customers. We encourage you to request more information on how Retail Pro can help you with your retail management system and loyalty program needs. Please visit us at http://www.retailpro.com/RequestMoreInformation.php

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As the global economy struggles to regain its strength, retailers are forced to make difficult choices about where they invest their scarce resources and what to expect in return. Should they buy or lease new store locations now that real estate prices have fallen? Or should they invest in technology? How about operational improvements? Employee productivity? Without adequate tools for decision making, picking the path with the best Return on Investment would require major guesswork and more than a little luck. Fortunately that is where Business Intelligence (BI) or Retail Analytics (RA) can make a difference.

BI or Retail Analytics tools ideally address several critical factors – first, they help businesses extract more value from  IT investments they have previously  made. Next, they empower managers with insightful information about their business that is not available through traditional daily or weekly flash reports. Also, a good analytics tool brings together valuable comparative data in an easy-to-use and understand dashboard-style graphical format. The simple graphical view can then be clicked upon for successive “drill-down” levels that expose the detailed data behind the dashboards. For example, Retail Pro dashboards can be personalized to each employee’s liking: sales by store, sales by hour, sales by zip code, margins, average receipt size, sales by department or style, total markdowns, vendors comparisons, stock on hand, etc. In summary, decisions no longer need to depend on guesswork, hope and luck. Managers now have daily access to valuable facts and trends from various parts of their business that can enrich their quest for continual business improvement. 

How to get started with BI? Existing Retail Pro customers have an easy path. Your Retail Pro POS and back-office system already has a wealth of data within it, ready to be transformed through BI into a dashboard format and delivered to your web browser wherever you are. For more information about our Retail Pro Business Intelligence module visit http://www.retailpro.com/solutions/BusinessIntelligence.php and then contact your authorized Retail Pro Business Partner for details.

For those retailers who are not a Retail Pro customer, we encourage you to take a closer look at our very popular retail management software to unlock the full potential of your business. To request more information and let us know if you want us to have an authorized Retail Pro Business Partner contact you right away, please visit us at http://www.retailpro.com/RequestMoreInformation.php

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