Have We all Taken a huge Step Backward? A brief history of Credit cards and Payment Processing

5 Essential Tips to Optimize Your Payment Processing Strategy - Nuvei |  Fintech and Sales Partnerships

The first credit cards in the united states were pretty safe. Arguably, the first credit cards date all the way back to the late 1930s  start a payment processing company. A conglomerate of gas stations decided to revolutionize the traditional way that customers put credit on accounts at storefronts. They all agreed to share customer accounts at different locations, and each customer would have a unique card with an identifying number to show in order to keep track of the accounts across locations. The basic idea of the card was born.

These cards were limited, and fraud could happen. When fraud did occur, it was comparable to fraud elsewhere. A family member or friend could lie to the clerk and claim that they had permission to use the card when they did not. This basic form of identity theft had limited potential for damage, and it was up to each individual clerk’s discretion as to whether or not a “charge” should be authorized.

In about a decade, credit was transformed from simple and frequently store-specific transactions to a worldwide phenomenon. The introduction of the world wide web to the public in 1992 opened new possibilities for payment processing online and offline. Merchants quickly jumped at the ability to swipe credit cards in storefronts, and major online payment processing giants such as PayPal were launched. The entire game changed. Payments became quicker and more convenient.

Additionally, the introduction of major credit cards made e-commerce viable. Instead of selling to an audience with limited computer literacy, merchants could have almost anyone recite a credit card number over the phone or type it in a system. Other advancements such as one-click payment options made e-commerce easier for merchants and consumers. Plus, consumers could ditch banks in favor of using credit cards in everyday transactions. No one really thought about how any of this could go wrong aside from theft comparable to cash theft.

Suddenly, swiping a credit card became less convenient. Major banks and credit companies started to embed small chips in cards. After all, tapping a card should be even more convenient for customers waiting in long lines and merchants eager to push long lines forward. However, criminals figured out that they could acquire the information from chips without leaving a single fingerprint on a stolen card. It was a brilliant and highly dangerous realization.

Currently, consumers can literally be robbed of sensitive information and have no idea while standing in lines or standing in crowded places. A few interesting questions suggest the industry has taken a huge step backward, and it has sacrificed consumer protection for unnecessary convenience. Online Payment processing gives your customers the convenience of being able to shop from their computers, without the hassle of having to physically visit your store. However, setting up your online store can be quite a daunting process. First of all you will need a merchant account.

A merchant account is a specialized bank account set up to accept credit card payments. Merchant Accounts are required for both online and offline businesses who wish to accept payments via credit cards. These accounts can be obtained from two sources; a bank, or a third party merchant account provider. A merchant account provided from a bank is often preferred as it can help build a stronger relationship with your bank. However, the main downside to obtaining the account from a bank is the fees, both application and ongoing, can be higher than third party providers.

As well as this, banks generally will not provide your business with a merchant account if it is believed to be a high risk. High risk industries include online pharmacy, travel and multi-level marketing businesses – however, all internet businesses carry a higher risk due to the fact that the credit card and card holder are not physically present during the transaction. If you are unable to obtain an account from a bank, you will need to turn to a third party merchant account provider. There are a couple of distinct advantages that third party payment processers have over banks, namely:

An increase in shoppers turning to the internet over the past few years has led to a rise in demand for online payment processors. Unfortunately, due to the inherently higher risk of fraudulent transactions associated with online transactions, most banks are hesitant to provide accounts to online merchants. To capitalize on the growing demand for merchant account and payment processing facilities, many third party providers have emerged that provide services specialized to online merchants.

There are a number of unique benefits to using a third party payment processor. First and foremost, many third party processors are able to accept merchants from around the globe, whereas a traditional bank will only provide services to local merchants. Secondly, and similarly, third party processors can process transactions from customers around the world – many banks will restrict this due to an increased risk of fraud. Unfortunately this restriction often means missing out on one of the major benefits to running an online business – reaching a global market.

Another benefit to using a third party payment processor is that often times rates will be lower than those of a traditional bank. This is mainly due to the fact that third party processors have relationships with multiple banks, allowing them to obtain lower rates for a variety of different merchants.

When looking for a third party payment processor, there are a number of key things to do in order to find the one that can offer your business the most. Obviously, you need to get quotes from as many processors as possible, this gives valuable information that you can use to compare processors. Next, look at their different services and compare them to what you need.

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