8 Strategies to Maximize Customer Lifetime Value

Customer lifetime value (CLV) is one of the most influential metrics companies use to predict revenue potential and make strategic marketing decisions.

Whether you’re operating a single brick-and-mortar store, eCommerce operation, or multi-location business, understanding how to maximize your customer lifetime value helps your team increase revenue by investing in the customers who are most likely to provide long-term profits.

8 Ways Your Business Can Maximize Customer Lifetime Value

These eight proven strategies will foster positive, long-term relationships between a business and its customers to improve average CLV.

1. Utilize Cross-Selling and Upselling 

Cross-selling is a sales strategy that persuades customers to purchase complementary products with their main purchase. For example, a fast-food restaurant might ask if you’d like fries with your burger, or an eCommerce website shows “customers also bought” suggestions.

Upselling offers customers an upgrade or special perks at a higher rate. Examples of upselling include a website setting a minimum order value to qualify for free shipping or an airline charging extra to let customers pick their seats on the flight.

Both strategies increase the order total to boost total revenue and CLV.

2. Offer a Memorable Customer Experience 

Did you know that 86% of buyers are willing to pay more for a better customer experience? Or that a poor customer experience stops 58% of people from doing business with that company ever again?

Offering omnichannel support, investing in your team’s CX training and customer care strategy, improving the customer’s journey, and taking additional steps to create a memorable experience will go a long way toward retaining happy customers and maximizing CLV.

3. Create a Loyalty Program

Don’t take loyal customers for granted! Entice your customers to continue using your business with a simple, easy-to-understand loyalty program that offers them perks, so they keep coming back for more.

For example, Starbucks rewards customers who download their app and join the rewards program. Customers can order ahead, pay through the app, and save time, giving them a more convenient experience. With each order, they also collect stars to earn free food, drinks, and more.

4. Listen to Your Customers 

If you’re proactive and using customer data analytics to monitor and understand your audience, then you’re probably aware of what your customers are saying. Are they happy with your products or services?

When customers aren’t satisfied, they’re usually vocal about their grievances, especially in product reviews and social media comments. Let them know you’re listening, you understand their concerns, and you’re taking steps to remedy the issues.

Don’t be afraid to send out surveys to collect direct feedback and turn customer complaints into customer care opportunities.

5. Reach Consumers with a Seamless Omnichannel Approach 

Today’s buyers are accustomed to shopping on a variety of devices, platforms, and channels. They don’t think about channel boundaries, and they expect businesses to be accessible at every touchpoint.

A well-structured omnichannel strategy is consumer-centric and connects all channels – phone, web, mobile, email, social, store, etc. – around the customer’s experience.

6. Build a Community 

Customers are more likely to remain engaged with your brand if they feel like they’re part of a community rather than a statistic pushed through a sales funnel. To maximize customer lifetime value, your business should seek ways to foster a community for your customers.

Interact with them on social media. Encourage consumers to post reviews and photos, share opinions, offer advice to one another, use branded hashtags, and engage in a community setting.

7. Set Up a Referral Program 

Remember that part of the CLV equation includes marketing expenses to attract and retain customers. Imagine how much you could maximize your average CLV if those customers found your business through word-of-mouth referrals instead of costly advertising campaigns.

Referral programs are easy to set up and serve as a low-cost way to increase customer lifetime value. When done correctly, a referral program fosters goodwill and genuine sentiment about your brand, products, and services. It rewards your existing customers for touting your business and offers incentives for new customers to give your brand a try.

8. Offer Free Upgrades 

Businesses sometimes balk at the idea of giving away freebies, but the truth is, they work. Not only do they make a positive impression, but they’re also a valuable way to conduct beta research on new products and get feedback from customers before the product launch.

Freebies and upgrades make customers happy and ensure they remember the positive experience with your business.

Businesses that calculate and analyze their CLV are in an advantageous position to predict their revenue growth and decide the best ways to spend their marketing dollars for maximum impact.

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Tap to Pay: What It Is and How It Works

Since the first plastic credit card was issued by American Express in 1959, payment tech progress has been growing exponentially. Magnetic stripe payments enjoyed a 30-year reign between the ’70s and ’90s. EMV chip card technology had a good two decades or so, beginning in the mid-’90s. And the winner of the 2010s and beyond is the NFC-powered, contactless sensation that is tap-to-pay.

Contactless payments became a must-have during COVID. Most modern card readers and payment terminals are NFC-equipped. But tap-to-pay is transcending that plastic card of the last 60+ years. NFC technology is in the midst of an evolution. Customers are driving digital advancements, and savvy small business owners should be aware of what’s to come.

History of Tap to Pay

Although contactless payments weren’t widely adopted until the 2010s, the technology actually dates back to 1995. In Seoul, South Korea, the Seoul Bus Transport Association introduced the UPass, a contactless payment card that commuters could tap on as they entered the bus. Almost ten years later, the US tried the technology, and it was four years after that when all EMV cards became NFC-equipped.

Despite the tap technology being available on most major cards, it was the smartphone advancements that really pushed consumers to adopt it. Tapping their phone to a terminal proved far more exciting than tapping the card.

Google was the first, in 2011, to enable contactless payments via their mobile app. Apple Pay caught up in 2014; in 2015, the wearables market made everyone aware of the tap’s potential.

Once the thought of the tap was there, the behavior followed. In 2015, many merchants switched to NFC-enabled terminals; by 2019, most banks were issuing contactless cards.

How Tap to Pay Works

Tap-to-pay, whether used with a contactless card or a smart device, operates through Near Field Communication (NFC) technology. This short-range wireless communication technology allows data exchange between devices close to each other, typically within a few centimeters.

NFC operates on radio-frequency identification (RFID) principles and electromagnetic induction, enabling communication between devices without needing physical contact or Wi-Fi connectivity.

Here’s how it works:

1.) NFC-enabled devices: The customer’s payment card (credit, debit, or mobile wallet app) and the merchant’s payment terminal must be equipped with NFC technology.

2.) Close proximity: The customer holds their NFC-enabled card or smartphone close to the merchant’s NFC-enabled terminal to make the payment.

3.) Data transmission: The NFC antennas in both devices communicate with each other. The customer’s payment information is securely stored in the NFC chip and transmitted to the merchant’s terminal.

4.) Authentication: The payment terminal validates the transaction by sending the payment details to the payment network (such as the card issuer—e.g. Visa, Mastercard, and the customer’s bank) for authorization.

5.) Secure transaction: The payment network verifies the transaction details, ensuring sufficient funds and confirming the transaction’s authenticity. A unique, one-time code is generated for that specific transaction if approved.

6.) Completion: The transaction is completed, and the customer receives a payment confirmation. The entire process is fast and secure and does not require physical contact between the card or smartphone and the payment terminal.

Benefits of Using Tap to Pay

During the pandemic, the number one benefit of contactless technology was the simple fact that it is contactless. No contact, no germs. But the benefits made known during that time were more aligned with the original reason for its development.

It’s faster

Contactless technology speeds up the payment process. Rather than “dipping” the card into the machine, merchants can quickly pass the reader close to the customer. The customer taps the card, and the transaction is complete. NFC devices facilitate the fastest and most convenient data exchange available today.

It’s secure

NFC transactions are secure due to the short distance over which they occur. Moreover, NFC devices can be secured with encryption and authentication protocols that ensure the confidentiality and integrity of the transmitted data, such as the cardholder’s personal information and card number.

It’s universally compatible

Unlike the chip card and magnetic stripe, NFC technology is standardized. This ensures compatibility between different devices and applications. Standardization enables seamless integration of NFC into more devices, including smartphones, tablets, payment cards, and other smart gadgets. It can power a payment future beyond our current plastic cards.

It’s versatile

One way to verify the longevity of a technology is to look at its usability outside of the obvious application. Businesses are using contactless loyalty cards and even loyalty apps that allow customers to store those loyalty cards digitally. Interactive marketing lets customers tap NFC-enabled promotional material to access offers, discounts, and product information. Beyond retailers and accepting payments, NFC is used for public transport, access control systems, smart advertising, data exchange between devices, and interactive gaming. NFC even enables smart packaging to provide customers with product and usage information at the point of sale.

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What is a Surcharge Fee? How it Helps Consumers and Businesses

In an era defined by digital transactions and cashless payments, the process of paying for goods and services is more convenient, and increasingly reliant on credit card transactions. However, as the popularity of credit cards and digital wallet payments continues to surge, the costs associated with accepting them also do. 

Businesses—especially small and medium businesses— continually seek ways to offset these expenses and improve profit margins, leading to the rise of credit card surcharging. 

In recent decades, credit card use experienced an unprecedented surge in popularity. Now ubiquitous, credit cards provide consumers with a quick and secure payment method, often with rewards and other perks. The rapid growth in credit card transactions led to an associated increase in the costs originating from the various card brands and incurred by businesses that accept them.

Credit card surcharge fees refer to the practice of adding an additional charge at checkout when a customer pays with a credit card. This additional fee is intended to cover the costs of processing credit card payments, thus shifting a portion of the financial burden from the business to the consumer. The concept of surcharging is gaining traction as businesses seek ways to maintain profitability in an increasingly cashless world.

Credit card processing fees, including interchange fees, assessment fees, and network fees, are a significant expense for merchants. The rise in these fees can be attributed to the substantial investment required for the development and maintenance of secure payment processing infrastructure, protection against fraud, and the convenience offered to consumers. 

A credit card surcharge fee is an additional fee that a merchant adds to a customer’s bill when they pay with a credit card. Surcharges are typically a percentage of the total purchase price and can range from 1% to 4%.

How Credit Card Surcharging Works

Compared to the many complexities of payment processing, credit card surcharging is a straightforward process. When a customer chooses to pay for their purchase with a credit card at the point of sale, the merchant adds a surcharge to the transaction. Businesses that choose to add surcharges can either charge a fixed flat fee or a percentage of the transaction amount with a cap o n the total.

Typical percentage rates or flat fees

• Percentage Rate: Businesses might add surcharges equivalent to a percentage of the transaction amount, typically in the range of 1% to 4%.
• Flat Fee: Alternatively, a fixed surcharge amount, often a small set dollar amount, is applied to each credit card transaction.

Merchants choose to surcharge credit card transactions to offset the cost of processing credit card payments. Credit card processing fees can be expensive, especially for small businesses. By surcharging credit card transactions, merchants can recoup some of these costs and keep their prices competitive.

While these costs are unavoidable, businesses are seeking ways to minimize their impact on their bottom line. 

Benefits for Businesses

Credit card surcharging offers several advantages to businesses, including:

Offsetting credit card processing fees by passing on some of the cost to the consumer can be particularly advantageous for smaller businesses with tighter margins.

Encouraging alternative payment methods—surcharging incentivizes customers to use alternative payment methods that don’t incur surcharges, including ACH, debit cards, or mobile payment apps, saving the business and consumers money.

Improved profit margins on transactions—as businesses regain control over their credit card processing expenses, they can improve their overall profitability, contributing to their long-term financial sustainability.

Benefits of Credit Card Surcharging for Consumers

While credit card surcharging may initially seem like a disadvantage for consumers, it also offers some benefits, including:

Awareness of the true cost of credit card payments

Surcharging makes consumers more aware of the costs associated with using credit cards for their purchases. This is particularly helpful for smaller businesses where transparency can help them make informed decisions regarding payment methods.

Potential incentives for using alternative payment methods

Credit card surcharges can nudge consumers towards alternative payment options like cash, debit cards, or digital wallets, which don’t carry these extra charges. This shift not only helps consumers save on costs but can also prompt businesses to offer special perks or discounts for using these alternative methods. It’s a win-win: consumers get to keep a bit more in their pockets, and businesses encourage more diverse payment methods.

Encouraging competition among payment providers 

The introduction of credit card surcharges can shake up the payment market, fostering a healthy competition among providers. As businesses and consumers search for more budget-friendly options, payment services are pushed to improve their offerings. 

Think lower fees, better security, and top-notch customer support. For the consumer, this means more choices, potentially lower costs, and a smoother payment experience. This competitive spirit not only benefits your wallet but also drives innovation in the payment sector, making transactions faster and more secure for everyone.

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What Does Credit Card Processing Cost?

Credit card processors typically charge a processing fee for every credit card payment you accept. Depending on your processor, you may be charged additional fees depending on what pricing model the processor uses.

Processing fees

Transaction fees can be broken down into two primary kinds: wholesale and markup. Wholesale fees, also known as “interchange” fees, are charged by the issuing bank and the card network. Markup fees are charged by the credit card processor and the payment gateway. Unlike wholesale fees, markup fees can be negotiated.

There are three types of credit card processing fees you should be aware of:

Interchange Fee. The interchange fee is the wholesale fee mentioned above. This is a standard, non-negotiable fee that covers the costs of processing the transaction, the risk of payment approval, and the risks of fraud and bad debt. Collected by the consumer (issuing) bank, the interchange fee is a percentage of the purchase total plus a set transaction fee that’s determined by each card network. This fee represents the largest cost of credit card payment processing, and is typically impacted by the type of credit card involved in the transaction. The average interchange rate in the U.S. is approximately 1.8% for credit cards and 0.3% for debit cards, but the actual rate a merchant will pay varies greatly. For example, interchange fees on premium or rewards cards are generally higher.

Assessment or Service Fee. This is another non-negotiable fee, but this time it’s the card network that charges it. This fee is typically a small percentage and can be affected by your transaction volume and your risk level as assessed or calculated by the card networks.

Processing Fee. Each payment processor charges their own fees. This is known as the payment processor markup, and it varies depending on the pricing plan of the processor.

Types of payment processor pricing models

Payment processors leverage a variety of pricing models. These are the four you are likely to come across when selecting a payment processor:

Flat rate. The processor charges a simple fixed fee for all credit and debit card transactions regardless of the card used for payment. Note that card-present transactions often have a lower flat rate than card-not-present transactions, as they carry less risk. This can be structured as a simple base rate (for example, 2.9%), or a base rate plus a small per-transaction amount (for example, 2.9% + $0.30 per transaction). This model merges the wholesale and the markup fees instead of splitting them out.

Tiered. The processor charges a fee based on the card type used in the transaction, how much risk is associated with the transaction, and the overall transaction volume of the business. This model is considered to be the most complex and potentially most confusing to merchants.

Interchange Plus. The Interchange Plus is the most common pricing model, and often considered the most transparent and cost-effective. Here, the merchant is charged a percentage of the transaction plus a fixed per-transaction fee. In this way, the wholesale fee (the “interchange” part) and the markup fee (the “per transaction” part) are distinctly and clearly separated. For example, a $100 payment made with a Visa Rewards credit card might carry a total (effective) rate of 2.13%, which includes the interchange fee, the card network fee, and any other fees charged by the credit card processor.

Subscription. The processor charges a flat monthly service fee, along with a small per-transaction fee. The wholesale fee is charged separately from the markup fee.

No matter which pricing model your business selects, note that not all transactions clear at the same rate. A qualified transaction will process at a lower rate than a non-qualified transaction.

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The Future of Payment Processing at Doctor's Offices

The healthcare industry is constantly evolving, and payment processing at doctor's offices is no exception. In recent years, common trends for payments in this field have emerged, all with the aim of making transactions more efficient, secure, and user-friendly. 

Let's explore three key trends that are shaping the future of healthcare payments: contactless payments, HIPAA compliance, and professional-looking smart terminals.

Contactless Payments: 

With the world increasingly prioritizing convenience and safety, contactless payment methods are gaining momentum in doctor's offices. Patients can now effortlessly make payments through tap-and-go cards, mobile wallets, and wearables, reducing the need for physical contact with payment devices. This method not only offers a faster, more efficient payment experience but also helps to minimize the spread of germs in high-risk environments such as healthcare facilities.

HIPAA Compliance: 

As digital payment systems become the norm, it is essential for doctor's offices to ensure their payment processing complies with the Health Insurance Portability and Accountability Act (HIPAA). This legislation safeguards patients' sensitive medical information from unauthorized access and misuse. By implementing secure, compliant payment systems, doctor's offices can not only protect their patients' privacy but also avoid hefty fines and potential legal repercussions.

Professional-Looking Smart Terminals: 

In today's digital age, first impressions matter. A sleek, professional-looking smart terminal can set a positive tone for the entire patient experience. Modern payment terminals come with enhanced security features, intuitive user interfaces, and advanced payment capabilities. These devices can help streamline payment processing while enhancing the overall patient experience.

The future of payment processing in doctor's offices is contactless, compliant, and cutting-edge. Embracing these trends will not only benefit patients but also enable healthcare providers to stay ahead of the curve in an ever-changing industry.

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Is Retail Going Fully Online? The Future Of Shopping

As the retail landscape continues to evolve, fueled by pervasive internet, advanced mobile and online shopping apps, and shifting consumer behaviors, merchants ask the question of whether all retail will migrate exclusively to online payment platforms. 

While online retail undeniably commands a significant share of the market and is expected to grow further, a complete transition away from physical stores seems improbable for several reasons.

The Growth of Online Retail Market Share

Online retail sales are steadily increasing year over year, with some projections estimating that online sales could eventually represent a significant portion of total retail sales. In 2023, e-commerce sales were 18% of retail spending.

If we consider the estimate of e-commerce sales accounting for approximately 20% of total retail sales worldwide by 2024, it’s plausible that this percentage could continue to increase over the coming years. Some analysts and industry reports may have provided estimates ranging from 25% to 30% or even higher by the mid to late 2020s.

While it’s challenging to provide an exact prediction, our models estimate that e-commerce sales could represent a substantial portion of total retail sales by 2050, potentially exceeding 50% or even approaching a majority share in certain regions or industries. 

We don’t think there is a world where all retail goes online. There will always be a need for physical payments and purchases.

Embracing the Physical Experience

Physical stores offer an irreplaceable element of tangible experience, particularly crucial for product categories such as clothing, furniture, and electronics. The ability to touch, feel, and try on products not only enhances consumer confidence but also facilitates immediate gratification, allowing customers to take their purchases home instantly. 

Moreover, physical retail spaces foster social interaction, provide personalized service, and often serve as community hubs, offering unique opportunities for engagement and support for local businesses.

Consumer Preferences and Needs

While online shopping provides unmatched convenience and accessibility, it does not cater to the preferences and needs of all consumers. Many still value the in-person experience and the expertise offered by brick-and-mortar stores. 

Certain product categories necessitate physical interaction before purchase, a factor that favors the continued existence of physical retail spaces. Certain product categories where buyers want the physical interaction before purchase include:

• Apparel and Footwear: Consumers often prefer trying on clothes and shoes to ensure proper fit, comfort, and style.
• Furniture and Home Goods: Customers typically want to see and feel furniture items, such as sofas, mattresses, and tables, to assess their quality, comfort, and aesthetics.
• Electronics and Appliances: Many consumers prefer to physically interact with devices like smartphones, laptops, and appliances to test features, performance, and usability.
• Jewelry and Watches: Customers often want to examine jewelry and watches in person to assess their craftsmanship, design, and authenticity.
• Cosmetics and Fragrances: Testing makeup, skincare products, and fragrances in-store allows customers to determine compatibility with their skin type and personal preferences.
• Home Improvement and DIY Products: Customers may want to inspect tools, hardware, and building materials to ensure they meet their specific needs and specifications.
• Automotive and Recreational Vehicles: Test driving cars, motorcycles, and other recreational vehicles is essential for evaluating performance, comfort, and handling.

Economic Realities and Practical Considerations

Establishing and maintaining a robust online presence can be a costly endeavor for businesses, encompassing expenses such as website development, digital marketing, and logistics. Furthermore, accessibility remains a concern, as not all consumers have reliable internet access or the necessary devices for online shopping. Additionally, the environmental impact of online shopping, including packaging and transportation, raises sustainability concerns compared to local in-store purchases.

A Hybrid Model for the Future

Rather than envisioning a wholesale transition to online retail, the future of retail is likely to be characterized by a hybrid model where digital and physical channels coexist and complement each other. Online platforms will continue to offer convenience and accessibility, while physical stores will evolve to deliver unique experiences, personalized service, and community engagement. This hybrid approach acknowledges the diverse needs and preferences of consumers, offering a balanced and inclusive shopping experience.

Adapting to Emerging Trends

Key trends shaping the future of retail include the seamless integration of online and offline channels through omnichannel shopping experiences, the enhancement of in-store experiences through innovative technologies like AR/VR, and a renewed focus on community-building and experiential retail.

While online retail will undoubtedly continue to play a prominent role in the retail landscape, the coexistence of physical stores is essential for meeting the diverse needs of consumers and sustaining vibrant communities. The future of retail lies in striking a harmonious balance between digital innovation and the enduring appeal of physical experiences.

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Why Digital Wallets Are Gaining Popularity

Every year, more and more people utilize digital wallets to store credit card, debit card, and even store loyalty card information on their smartphone, wearable, or another mobile device. Mobile wallets allow users to quickly and easily make purchases in-stores and online, withdraw cash from ATMs, and send money peer to peer-giving them greater flexibility and convenience in payment choice.

Mobile WalletMobile wallet use is steadily growing. In fact, in-store mobile payments are expected to top $500 billion by 2020. Here, we’ll examine some of the reasons digital wallets are gaining popularity.

Growing Awareness

The greatest roadblock to mobile wallet use is the lack of awareness of this type of service, where it can be utilized, and how it’s accepted. According to Accenture, the majority of consumers (52%) claim to be extremely aware of mobile payments-up nearly 10% from last year. Because more and more people are aware of the service today, it is naturally gaining in popularity.

Digital wallet providers are using social media, traditional marketing, and other resources to spread the word about the benefits of mobile wallets. It seems to be working.

A study from MasterCard tracked 3.5 million social media conversations about new forms of payment and discovered that over 75% of those conversations were about digital wallets. In other words, awareness of digital wallets is growing.

Greater Acceptance

Not only are more people aware of digital wallets, more locations and websites are accepting them as a form of payment. As more and more consumers become aware of and begin to use mobile wallets, merchants are naturally beginning to see the benefits of accepting mobile payments.

More Options

One of the biggest reasons mobile wallet adoption is on the rise are the options they give to consumers. There are two main types of digital wallets: single purpose and multi-purpose.

As you can imagine, single purpose wallets are branded apps that work for one use only. This can be a store app that combines loyalty programs, gift cards, and other options. It can also be a credit card app that only offers one choice in form of payment.

Multi-purpose mobile wallets allow users to store a number of different credit cards, debit cards, gift cards, loyalty cards, and more in one wallet. These wallets attempt to replicate physical wallets by offering a number of options.

Users of multi-purpose wallets are able to store all their payment information in one convenient digital wallet. Choosing which card they want to use or accessing their loyalty account right from their phone or wearable device.

Digital wallet providers are giving users more options for digital payment. More options translate into greater popularity and use.

Mobile Shopping

Payment OptionsThe incredible growth of mobile shopping (mCommerce) is having a definite impact on mobile wallet popularity. Online shopping, often referred to as eCommerce, is a force in US retail sales. According to BigCommerce, 95% of Americans shop online at least once a year.

While eCommerce is steadily growing, official census data estimates that around 15% growth from the previous year, mCommerce (mobile shopping) is expected to explode by the end of the decade. Business Insider forecasts mCommerce to make up 45% of the total eCommerce market by 2020, up from 11% in 2014.

So, why would the growth of mobile shopping have an impact on mobile wallet use? The answer is integration. Mobile wallets allow users to make easy, quick payments without entering their credit card information into a website.

Digital wallets allow consumers to make quick payments on mobile devices by choosing the appropriate app on checkout. Modern shoppers want an all-inclusive shopping experience and that includes payment.

Shopping cart abandonment can be minimized with a seamless, easy checkout process. Mobile wallets integrate seamlessly with mCommerce allowing shoppers to make a payment without ever leaving the website.

Youth Utilization

Of course, one of the biggest reasons for the increase in popularity of mobile wallets is youth acceptance and usage. A study conducted by Alcatel-Lucent discovered that over 80% of youth showed a strong interest in using mobile wallets.

Furthermore, a recent study showed that 64% of 18-25 year olds use a mobile wallet to make some purchases. Even more striking is that the same study revealed that nearly half of young people believe that physical money will be phased out over the next 20 years.

This means that mobile wallet providers have a built in customer base in the next generation. Young people already see the benefits of mobile wallets and are adopting them as a preferred form of payment.

Larger mobile wallet adoption amongst young people reinforces the indication that mobile wallet popularity is more than a trend-it’s the next logical step in digital payment.

Security, Flexibility, and Convenience

Thumb ImpressionsUltimately, the greatest reasons for the growing popularity of mobile wallets are the benefits of increased security, flexibility, and convenience.

Digital wallets offer consumers greater security. From biometric authentication to the ability to lock a lost or stolen phone, mobile wallets provide better security. Some mobile wallet providers require a selfie to authenticate payment, while others require biometric authentication like a fingerprint to make a purchase.

These security features are much harder to break than using a lost or stolen card. What’s more, if a physical wallet is lost or stolen everything inside is lost—cash, IDs, payment cards. If a mobile device is lost or stolen the phone and digital wallet can be locked to avoid unauthorized use.

Finally, people don’t want to carry around a bulky wallet with a bunch of credit cards, debit cards, and loyalty cards. Mobile devices neatly carry all the information needed to shop, giving users greater flexibility and convenience.

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What Is Dual Pricing?

A Revolutionary Credit Card Processing Strategy

In the fast-paced world of financial decision-making, staying ahead of the curve is essential for any business seeking growth and success. This is especially true as you search for cost-reduction exercises to retain employees without cutting back on any other avenue of your company. As someone responsible for the financial health of your organization, you understand the importance of optimization to guarantee success. One aspect of your organization where optimization opportunities exist is your merchant account — specifically, the fees associated with payment processing. Taking advantage of the tools at your disposal will give you more control over your processing fees and help you counteract market shifts and inflationary pressures.

In the wake of Visa’s most recent changes to the surcharging cap, merchants are searching for alternative strategies that offer similar impacts. A lesser-known and under-discussed payment solution exists that not only offers unparalleled transparency but also empowers you to tailor services to your unique business needs. This solution is called dual pricing and it’s a game-changing model that’s revolutionizing the merchant services industry, especially after recent developments regarding surcharging. Dual pricing gives you a more hands-on approach to managing your organization’s financial health. In the ever-evolving world of commerce, staying ahead of the game is crucial for businesses seeking sustainable growth and profitability. Among the many advancements that have reshaped the merchant services landscape, dual pricing stands above the rest as a disruptive and incredibly useful tactic. 

What is Dual Pricing?

Simply put, a dual pricing system provides discounts to customers who opt to pay with cash. This is a win-win incentive that saves your customers money while reducing your credit card transaction fees. Businesses can adopt this pricing model through a payment terminal or point-of-sale (POS) system, presenting both cash and credit prices. Or, if you’re handling business-to-business transactions, you can list the payment options on your clients’ invoices. To ensure compliance, it’s crucial to advertise the credit card price either as the full amount or alongside the cash price.

Dual Pricing vs. Surcharging

As a financial officer, it’s vital to distinguish dual pricing from surcharging, considering their unique characteristics and legal implications. Surcharging entails adding a line-item fee to the purchase price when customers pay with credit cards. Dual pricing, on the other hand, displays a lower cash price as a discount. While surcharging increases the price, dual pricing discounts it. This is significant because each system could influence customer perception differently. 

Additionally, while dual pricing is legally permissible nationwide, surcharging is prohibited in some states and subject to specific regulations in others, with varying maximum surcharge rates. Furthermore, credit card brands may have their own rules concerning surcharging.

Considerations Before Implementing Dual Pricing

Just like with surcharging or any other payment solution, dual pricing will impact your business differently depending on a wide variety of factors. For the purposes of this analysis, we’ll take a deep dive into dual pricing considerations for a middle-market B2B service provider. However, it’s important to perform a similar analysis if your business doesn’t fall under this category. As you assess whether dual pricing aligns with your middle market B2B service provider’s objectives, keep these essential factors in mind.

The Payment Preferences of Your Customers

Analyze your customers’ payment habits and preferences. If a significant proportion already prefers cash or ACH payments, dual pricing could be an effective strategy to introduce alternative ways to collect dollars while reducing your days to collect. This approach allows credit card users to cover the full price while regular cash-paying/ACH customers benefit from the discounted cash price. However, if a substantial portion of your customer base uses credit cards, dual pricing might be perceived as penny-pinching and could adversely impact your business.

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How QR Codes Work in Payment Processing

In the rapidly evolving world of digital payments, QR codes have emerged as a top payment trend, revolutionizing the way transactions are conducted. This article delves into the realm of QR codes for payments, exploring their mechanics, widespread adoption, and the transformative impact they have on the financial landscape. The global QR code payment market was valued at USD $11 billion in 2023 and is anticipated to grow at a CAGR of 16.5%. It is expected to surpass USD $52 billion by 2032. In 2024, the USA, India, and France have the highest adoption of QR codes.

We will explore the various facets of QR codes for payments, including their operation, benefits, challenges, and future prospects. We will also highlight notable use cases and the impact of QR codes on different industries, providing a overview of this transformative payment technology.

What are QR Codes?

QR Codes, short for Quick Response Codes, are a type of two-dimensional barcode that can store a wide variety of information. QR codes were originally developed in 1994 by Denso Wave, a Japanese company.

Unlike traditional barcodes, which are limited to storing a small amount of data in a horizontal format, QR codes can store significantly more data both horizontally and vertically. This capability makes them ideal for a variety of applications, including payment processing, product tracking, and marketing.

A QR code consists of black squares arranged on a white square grid. The arrangement of these squares encodes the information within the code. QR codes can encode various types of data, such as text, URLs, or other data types used in automatic identification and data capture (AIDC) technologies.

To access the information stored in a QR code, a user simply needs to scan the code with a QR code reader, which is often a feature included in smartphone camera applications. Upon scanning, the reader interprets the pattern of the squares and converts it back into the encoded data, which can then be used for various purposes, such as directing the user to a website, displaying a message, or initiating a payment.

QR codes have gained widespread popularity due to their versatility, ease of use, and the ability to store a large amount of data in a compact format. They are used in various industries and applications, from advertising and marketing to supply chain management and contactless payments.

QR Codes in Payment Processing

In the context of payment processing, a QR code is a two-dimensional barcode used to facilitate quick and secure transactions between a payer (such as a customer) and a payee (such as a merchant). The QR code contains information related to the payment, such as the merchant’s identification, the amount to be paid, and a transaction reference. When a customer scans the QR code using a smartphone or a dedicated QR code scanner, the payment app interprets the information and initiates the payment process.

QR codes in payment processing can be categorized into two main types:

• Static QR Codes: These QR codes contain fixed information and do not change with each transaction. They are often used by merchants for accepting payments, where the same code can be scanned by multiple customers. However, the customer usually needs to manually enter the payment amount.
• Dynamic QR Codes: These QR codes are generated for each transaction and contain specific details such as the exact amount to be paid. This ensures a faster and more secure transaction, as the code is unique and can include additional security features like encryption.

QR code payments are popular because they are convenient, fast, and secure. They allow for contactless transactions, reducing the need for physical contact or handling cash. Additionally, QR codes can be easily displayed on various media, such as screens or printed materials, making them accessible for both online and offline transactions.

How QR Codes Work in Payments

QR codes have become a popular method for facilitating payments due to their simplicity and efficiency. Here’s a step-by-step explanation of how QR codes work in the context of payments:

1. Generation of QR Code

For a transaction to occur, a QR code needs to be generated. This can be done by the merchant or the payment service provider. The QR code contains encoded information such as the merchant’s account details, the transaction amount (for dynamic QR codes), and other relevant payment data.

2. Displaying the QR Code

The generated QR code is then displayed to the customer. This can be done in various ways, such as printing the QR code on a bill or displaying it on a digital screen at the checkout counter or on an online payment page.

3. Scanning the QR Code

The customer uses a smartphone or a dedicated QR code scanner to scan the QR code. This is typically done through a payment app or a mobile banking app that has QR code scanning capability.

4. Decoding the QR Code

Once the QR code is scanned, the app decodes the information embedded in the code. This information is used to initiate the payment process. For dynamic QR codes, the payment amount and other transaction details are automatically retrieved. For static QR codes, the customer may need to manually enter the payment amount.

5. Payment Authorization

The customer reviews the transaction details on their device and authorizes the payment. This could involve entering a PIN, using biometric authentication, or confirming the payment in some other way, depending on the app and the security requirements.

6. Transaction Processing

After the payment is authorized, the transaction is processed through the payment network. The funds are transferred from the customer’s account to the merchant’s account. This process involves communication between the customer’s bank, the merchant’s bank, and any intermediaries involved in the payment processing.

7. Confirmation of Payment

Once the transaction is completed, both the customer and the merchant receive confirmation. The confirmation can be in the form of a digital receipt, a notification in the app, or a message displayed on the screen.

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Credit Card Data: What You Can and Can’t Store

We’ve all heard stories about credit card fraud, of staggering amounts being stolen from businesses both small and large, retail and online. We know how fiercely we should protect our own. Fraud losses can be devastating and unexpected as we transact in an era of increasing technology and innovation.

Compromising the security of our customers’ payment information is reputationally damaging and even the most well-equipped stores may experience fraud at one point or another. The most important thing is to reduce your risk as much as possible and make sure you follow changing rules in the payment card industry–and have a reliable merchant services provider that does.

Whether it be in your CRM system or for a recurring billing plan, there are legitimate reasons merchants need to keep identifiers of their customer’s payment method on file—better known as a “card on file”—but, what exactly are you allowed to store? And how are you allowed to?

First, make sure you are using payment card industry (PCI) compliant equipment and hardware, which is designed to handle payment data safely so you don’t have to. As a general rule of thumb, only store what you absolutely need to in addition to this.  

Cardholder Data: May be stored if rendered unreadable

Cardholder Data (CHD) includes the 16-digit primary account number (PAN), cardholder name, service code, and expiration date. You may only store certain elements of CHD according to PCI rules, and it can only be stored for a “legitimate legal, regulatory, or business reason”.

There are 12 PCI DSS rules and rule 3 focuses on methods to safely store CHD. Here is a summary of acceptable methods:

Hash functions

• These are simple index markers that flag records in a database where sensitive data is actually stored (in another secure form).

Truncation

• Also known as masking, this removes segments of data, such as showing only the last four digits or only the first six digits of a PAN. No more than the last four or first six may be shown in this method.

Encryption

• An algorithm combines sensitive plain text data with a random key that works only once.

Cryptography

• Formulas that make plain text data unreadable.

Sensitive Authentication Data: May never be stored

PCI requirement 3.2 states that Sensitive Authentication Data (SAD) can never be stored after authorization is completed. This means that the data can be collected for the purposes of authorizing a payment transaction, then it has to be deleted. It includes magnetic stripe data, PIN and PIN blocks, and card verification codes.

What are Card Verification Codes or Values (CVC or CVV)?

CVC or CVV are types of data necessary to authorize digital payments and refer to the three- or four-digit number typically printed on the back (but may be on the front) of a payment card. Depending on the card brand this might also be called the CID, CVC2, CVV2, or CAV2.

CVV is a security feature that should be collected at the point of sale for online or phone order transactions, but may never be stored after payment authorization. The point is to make sure the card-not-present transaction is being made by a customer with the physical card on hand. Merchants don’t have to collect this every time for card on file or recurring payments.

How do you delete sensitive authentication data?

Don’t worry – Developers of payment solutions have to get PCI-approved before they bring to market software and hardware, and it must have secure, automatic deletion techniques in place. So, verify that your payment solution is up to date, then you just have to make sure you don’t store SAD in your own system. Encryption is not sufficient; all data must be properly deleted so that it can never be recovered.

What if a customer requests CVV storage?

This is prohibited according to PCI rules, and merchants may not grant customer requests to keep CVV or any PCI-prohibited card data on file after payment authorization.

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