By Thomas Lyle on April 5, 2011 at 8:48 AM
Today's traveler uses credit cards for many of their travel-related transactions including booking confirmations and pre-paying for hotel accommodations. Having a "cash only" policy will actually exclude some potential travelers from staying at your property. There is a high chance for them to choose a different hotel simply because they need to pay using credit.
As a business manager, it is crucial that you understand how to allow credit card payments while protecting against fraudulent activities.
Key Players and Terms of Credit Card Processing
The process of accepting credit cards starts first with a Merchant Processing Service. This service will facilitate the card processing transactions - telling you if they are accepted or declined - and ultimately directing to which bank account the funds are to be deposited. Your local bank is a good place to start with but there are numerous providers and resellers offering this type is service. Their fees will vary wildly; some with low monthly fees and modest discount rates - the amount of the transaction the card processor keeps - while others have different combinations and offers. You should know your business and transaction volume in order to know which deals work the best for you.
Usually, the merchant processing service will provide, sell or lease a terminal for you to use to swipe the credit cards and print receipts. These days it is not necessary to buy a separate machine simply to charge a card. Virtual Terminals perform the same function as the machine but are a piece of software or even a Web service. You can even connect a website to a card processing service. Because there are so many processing services it does not make business and fiscal sense for a software developer to try to connect to each processor individually. This has given rise to the Payment Gateway.
Payment Gateways are services that focus on supporting payment processing services. Now, a software developer - and their service - can create a connection to one service and support many customers. Typically, payment gateway services charge a modest monthly fee and a small transaction fee.
How It All Works
By now there are five or more companies involved with completing a single credit card transaction. I will discuss this process in more detail in an upcoming blog post but for now let's take a quick walk through the flow.
You or your guest use your website or web service to charge a card. In Frontdesk Anywhere this may be the front desk agent charging for a guest stay. The web service sends basic information needed to process the guest's card including card number, expiry, bill amount and credentials for the hotel to the payment gateway. The payment gateway identifies which hotel is sending the information and forwards the details to the card processor. The card processor in turns communicates with the card holder's bank to see if the payment is approved. If it is, the banks begin the crediting and debiting processes and sends a success message back to the payment gateway and then back to Frontdesk Anywhere. Likewise, a failure notice is sent if the card is declined.
Setting-up safe measures and policies to protect the hotel against fraud and payment abuse is a far superior way to conduct business than saying 'no' to credit cards. The card payment industry has many processes in place to facilitate fast and efficient card processing that is also safe and secure. One night of rent lost to a competitor simply because you don't accept credit cards costs more than the typical credit card processing fees that are paid each month.