From telecommunications to toilet paper, the recent pandemic has made massive changes around the world—including the credit card processing industry. Find out what these changes are and what they can mean for your business.
For many, the letters “B.C.” are beginning to take on a new meaning: “Before Covid”.
It’s difficult to find anything that wasn’t changed by the COVID-19 pandemic. It has touched nearly every aspect of our lives—including how we do business.
As the dust begins to settle and we see what “the new normal” looks like, it’s important to note how things have truly been affected. Doing so will help you adapt your business to both past and future changes.
1. Stricter requirements to start processing payments
Risk is nothing new for the financial industry. It has always been part of the equation: the greater the risk, the slower money flows.
This hasn’t been a great time to start a business—particularly if your business is considered risky.
This is the case for businesses applying for a merchant account, which enables them to start taking payments. In order for them to be approved by a payment processor, the business undergoes a review to ensure they abide by specific standards and rules, known as merchant underwriting.
The business type, background, risk of fraud, and financial stability all go under scrutiny during the underwriting process. Another concern is the amount of chargebacks, where customers demand refunds or initiate disputes.
Since the pandemic began, merchant underwriters are much more strict regarding what kinds of businesses they accept, as well as the amount that these businesses are allowed to process.
The lesson: If you are starting a business and will need a merchant account, make sure you can demonstrate your financial strength to the merchant underwriters—especially if you are a high-risk business.
2. More credit cards, less cash
When the pandemic first hit, credit card use ground to a halt. In fact, credit card use declined 40% between March and April 2020. However, their use quickly came roaring back.
Because consumers are doing everything they can to limit contact to avoid COVID-19 transmission, cash has been used less and less. Consequently, the volume of credit card payments has skyrocketed, which are much cleaner than cash since a card isn’t circulated among the general public like cash is.
Amazingly, 2020 ended with credit card companies posting $176 billion in income, down only $2 billion compared to 2019 despite several months with record-low transaction volumes.
The lesson: Make sure your business has the best credit card processing rates to save you money, since credit card use is only set to increase.
3. E-Commerce is now essential
As student’s classes, work meetings, etc all went online, so did many aspects of business.
Brick and mortar businesses faced collapse from a major drop of in-person sales due to lockdowns and public fears. For many businesses—especially small businesses—the pandemic made it clear they needed to move their products and services online to stay alive.
Those that shifted online early benefited the most. In fact, e-commerce grew a whopping 32% in 2020 compared to the previous year according to the U.S. Census Bureau of the Department of Commerce.
Since COVID-19, innovative businesses have been teaming up with payment processors to make sure that they have the best digital channels and relevant payment methods. That way, they can fully embrace the power and opportunity of online retail.
The lesson: Moving your business online is no longer considered optional for most small businesses. Consumers now expect to do as much as possible online, including safely and securely shopping and browsing for services. Along with having a strong online presence, consider teaming up with a payment processor that offers support for online payment methods.
4. Cleaner contactless payments
The same reason consumers prefer credit cards instead of cash is also why contactless payments are on the rise: cleanliness. If a consumer can minimize having to touch a POS system with their card, they can reduce their chance of spreading COVID-19 even more.
As a result, tap-and-go credit cards, QR code transactions, and mobile wallets have exploded in popularity. They are quickly becoming the prefered way to make a credit card payment. In fact, 51% of Americans surveyed by Mastercard are regularly using some form of contactless payment.
As is always the case, once the public embraces a new, safer, easier technology, they’re not likely going back. Thus, expect the popularity of these forms of payment to only increase.
The lesson: Make sure your system accepts the most popular forms of contactless payments. Choose POS systems that have NFC technology, QR code capabilities, and other digital capabilities.
5. Businesses looking for savings
The pandemic has brought more than just health risks.
Its effects on operating costs have left many companies struggling financially. Record levels of inflation, higher costs of materials, wage increases, logistics challenges—the list goes on and on.
Consequently, many businesses are looking to offset higher operating costs with savings elsewhere. This allows them to grow even during a time of change.
One approach to savings is businesses reducing how much they pay for processing credit cards. By looking at an itemized summary of their processing fees, they have been able to negotiate a reduced rate from their payment processor. Some have realized it was best to find a more affordable one.
Cash discounting is another great example of businesses embracing a new way to save. A record number of new businesses have embraced this program during the pandemic. This is a method that’s available in all 50 states and can reduce or even eliminate credit card processing fees.
Want to know how much your business can save by using it? Take a look here and enter your monthly credit card processing volume to learn exactly how much your business will save per month with cash discounting.
The lesson: Examine how much you’re spending on credit card processing fees. These fees can vary from one processor to another, which means you can save money by choosing a processor who offers more competitive pricing.
Along with examining your payment processing costs, take a moment to see if cash discounting can further save your business money.
Like it or not, the pandemic has changed how we live and how we do business. Learn to accept how things have changed with credit card processing. This will help you make decisions that will benefit your business going forward.
PPS wants you to know exactly how your business can save money. By providing you with the education you need, we help your business continue to thrive in changing times. Take a look at our blog to learn more about how you can save each month.