Overview
Card payments (which includes payments made with a mobile device, e.g. ApplePay) typically account for 80%+ of all hospitality payments, and the various fees and surcharges can be significant. The card payments industry is fiendishly complicated, opaque and unintuitive. The two elements you need to consider are:
The provision of PIN entry devices (PEDs), otherwise known as (credit) card terminals or ‘PDQ machines’
A credit card service provider (a company that you pay to handle card transactions), also known as ‘merchant services’
As a merchant, for real-world payments, you can choose to buy or rent all-in-one PEDs which include the card payment fees, OR you can buy or rent PEDs from one company and get card payment (merchant) services from another. As a general rule, the bigger you get, the more it’s worth disaggregating equipment and services. When you’re a giant, you can disaggregate these fees even further, but that’s at the 100+ venues level.
Smaller operators will find the level of convenience and speed of deployment of all-in-one systems to be worth the relatively high transaction fee. These companies also tend to take care of most compliance issues for you, which is worth a lot, and you have only one company to contact to manage your account, place orders for new shop openings, and so on.
Larger organisations will find there are potentially huge savings to be made in having separate relationships with card services companies and PED hardware providers. This is because you can reduce each contract to its essentials and pit providers against each other. However, this process is very time-consuming, such that staff time spent on procurement could potentially eat into the savings generated. You will also be more responsible for PCI (Payment Card Industry) compliance, which comes with its own set of challenges and time commitments.
Companies with card payment turnover in excess of around £50m per year might also want to have a separate, direct relationship with American Express (Visa and MasterCard transactions would go via your card payments provider). Most card payments companies will add a margin to Amex’s already-high fees. Keep in mind that Amex is a NIGHTMARE to work with for all but the world’s largest merchants, and the benefits to retailers of accepting Amex are vastly overstated. Think carefully, and do a thorough financial model, before accepting Amex payments.
Critical functions
Despite the complexity of the system, there is really only one main function: accepting card payments in your venues. However, you might also want to consider:
Can customers get an emailed receipt, instead of paper? This might involve them entering their email address, so speed of service could be compromised, but it’s a great way to save paper and (potentially) gather an email address for marketing (if they opt in).
Can customers add a tip and/or charity donation to their bill, if that’s something you need? The latest systems make this very easy and transparent, even giving the options for a specific percentage, so the customer doesn’t have to do the maths.
For table service venues, can the team member easily split the bill, e.g. by the number of diners, or some other metric, so they don’t have to do the maths when taking payment at the table?
Online card payment services - if you do e-commerce or order ahead, is it possible to use the same company for your in-store and online payments? It won’t always be possible (or beneficial) depending on how you’ve set up your POS and e-commerce shop, but using the same company for both means (1) one less supplier to work with and (2) the combined transactions from in-store and online might push you into a higher tier of annual transactions, resulting in lower fees.
Novel payment types: does your provider accept Apple Pay, GooglePay, SamsungPay and so on? Note that the normal £30 contactless limit can be waved for these payment types, so your customers can use their preferred method of payment for any size of transaction. This is called ‘high value transactions’ or HVT and is normally a setting you need the card payment provider to enable.
Important integrations
The most critical integration for card payments is with your POS system. You want to ensure that your POS and PED can be ‘fully integrated’, i.e. that when the cashier presses ‘card payment’ on the POS terminal, the amount is sent automatically to the PED, and the transaction outcome (approve or decline) is sent back automatically from the PED to the POS. This means:
No risk of manual rekeying errors
Substantially faster service
Reduced risk of fraud (as staff can’t initiate card payments without a corresponding transaction)
Much faster end-of-day procedures as staff don’t have to reconcile card payments with POS data
The POS system will print integrated transaction and card receipts, saving paper and avoiding the need for two lots of till roll paper.
Most POS providers have an integration with at least one PED manufacturer. However, if your POS provider ONLY integrates with ONE PED, this means you have zero leverage on PED pricing, and zero leverage when something goes wrong with your PED or related infrastructure. This undoes all the hard work you put into choosing your POS provider! Ideally, you should pick a POS company that integrates with at least two PED manufacturers. You should always ask for integrations that are ‘in live use’ (i.e. someone has done the hard work of getting the systems to talk to each other), as opposed to ‘we could connect to them’.
Users
In counter-mounted POS terminals in grab-and-go settings, integrated PEDs will only be used by your customers - the POS terminal should do all the hard work. In a restaurant setting where customers pay at the table, handheld terminals will need to be used by customers and staff. Before you commit to buying, try using your preferred PED in a competitor restaurant, and think about the ease of use and customer experience. This will generally be the final interaction the customer has before leaving the venue, so you want it to be slick, efficient and positive.
