October 20, 2014

Key Payment Factors to Ensure a Successful Future

There’s no doubt that commerce is undergoing a complete and rapid transformation. Whether examining changes to the regulatory business landscape or innovations in point-of-sale (POS) solutions, 2012 was a landmark year for the payments industry.

While many factors continue to contribute to the evolving payments ecosystem, there are key trends and requirements that are essential to small businesses’ success in 2013 and beyond. For example, non-cash payments continue to be a significant component of most business’ receivables. Beyond traditional debit and credit, transactions made by mobile devices and contactless cards continue to gain popularity.

According to our First Data study, 60 percent of consumers believe contactless payments translate into faster transactions, with 36 percent saying mobile purchasing is more convenient than using a credit or debit card in person at the store.  Small businesses must respond quickly as more empowered consumers expect an integrated buying experience that’s quick and consistent everywhere.

Fortunately, smaller companies are nimble enough to adapt quickly and cater to today’s tech savvy customers, but they must be mindful of new technologies and processes that can help contribute to the company’s bottom line.

To stay relevant and remain competitive, business owners and decision makers should consider: 

Integrating Payments Solutions

Most would agree that 2012 was the year of “Universal Commerce” where increased information, technology sophistication and access transformed commerce.  As payments, social networking, and commerce continue to intersect through smartphones, tablets, personal computers, and brick-and-mortar stores, consumers seamlessly blend and coordinate their shopping activities across online, offline, and mobile channels in pursuit of value, convenience, and a personalized buying experience.

Consumers are especially interested in how this can help save them time and money — for instance, self-checkout using a mobile phone, receiving special offers when near a store, or using mobile apps and web browsers on tablets to interact, review, browse, compare, manage, and buy — whether in a store, at home or on the go.

Research shows that one-third of consumers would like a seamless shopping experience — meaning any transaction, on any device, at any time. This creates both opportunities and challenges for small businesses.

Retailers that proactively invest in smart point-of-sale (POS) solutions can help future-proof themselves by ensuring they are prepared for inevitable changes in the industry. However, planning is a challenge as the market is still evolving and quite fragmented. There are many different approaches to eCommerce and mobile payments based on a variety of technologies, and the market has no clear winners yet.

Small businesses need a single point of integration with access to all payment types, all industries, and all platforms – anywhere. For example, some new solutions provide online test environments and readily available support resources, and offer accessible online certification management, tailored developer toolkits, and immediate access to innovative payment technologies, all through a simple Web portal. Payments partners can help small business owners identify these solutions and new technologies.

Layering Data Security Solutions

Payment experiences must be efficient, secure and reliable for both the customer and the small business owner. That’s why businesses that accept credit or debit payments need to comply with the Payment Card Industry Data Security Standard (PCI-DSS). 

While small businesses have a responsibility to protect their customers’ data, they do not have to do it alone. In fact today’s payments providers offer solutions that help achieve and maintain PCI compliance much easier and faster. 

Solutions that combine the flexibility of software or hardware based encryption with random number tokenization technology help by removing the need for small businesses to store card data. Instead, data is replaced with a randomly assigned number called a token. This protects payment card data and prevents it from entering the merchant environment. As a result, systems never hold the actual card numbers from the transactions processed. These solutions can help business owners stay PCI compliant while securing their customers’ data. 

In addition, payment providers can help small businesses stay up-to-date with emerging data security trends and technologies such as Europay, MasterCard and Visa (EMV) standards and smart card adoption that are becoming more important than ever. Small business owners should start considering what a smart card implementation might mean to their businesses and look into options for accepting new chip-based credit and debit cards to their customers. Implementing technologies like chip-based security, including EMV, can protect card-present transactions for both physical cards and virtual wallets. 

Complying with IRS Regulations

The regulatory landscape for the payments industry continues to change at a rapid pace. Section 6050W of the Internal Revenue Code containing revised transaction reporting and withholding requirements began impacting merchant transactions in 2011. Obligated reporting entities (the processors and financial institutions responsible for managing merchants’ payment authorizations) must report merchants’ payment card and third party network transactions, based on validated tax identification numbers (TIN) and tax filing names. 

Beginning in 2013, non-compliance will result in backup withholding being subtracted from merchants’ daily deposits, which are based on the current IRS withholding regulations (currently 28 percent). The new standards require businesses to track and report gross dollar sales amounts for payments made with credit and debit cards, some gift and stored value cards, as well as payments handled by a third-party network payments provider. In addition to federal backup withholding, there are now a few states that are also requiring backup withholding, including California and Maine.

These requirements do not bring small business additional time to prepare. While the IRS has introduced a new document – the 1099-K – to support this change and serve as the reporting document officially used to report these results, small businesses should seek out a regulatory package to assist with compliance on such timely regulations as the IRS Tax Reporting requirements.

Ensure a Successful Payments Future

Developing a strategic plan to address the challenges and opportunities that come with today’s evolving payment landscape requires a careful evaluation of a wide variety of factors.

Fortunately, small businesses are not alone in this endeavor. They can work partners that have relationships across the full Universal Commerce ecosystem and take advantage of today’s opportunities to thrive by providing a consistent, seamless consumer engagement experience.

Credit Card Photo via Shutterstock

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Brian Goudie


Brian Goudie Brian Goudie is a Senior Vice President at First Data, a global technology and payments processing company that serves more than six million merchant locations worldwide. Goudie has more than 16 years of experience in the payments industry and heads up First Data’s Small Business Center.

3 Reactions

  1. It’s important to follow payment regulations while at the same time being flexible to take payments in various forms. This piece serves as a good guide to help us do so. Thanks for sharing this informative post with the community. I appreciate it.

    Ti

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