Cash is no longer king because plastic is now prevalent. According to a Forbes Advisor survey, only 9% of Americans still prefer to use cash when paying for purchases. 36% of the participants listed credit cards as their preferred payment method. This means that while your business operations won’t halt if you don’t accept credit cards, it will result in lost sales.
If your business wants to expand its customer base and stay competitive, it must accept credit card payments. Credit card processing requires a network connection to receive authorization and finalize transactions. So, what happens if your machine suddenly goes offline? This is where offline credit card processing comes in.
Offline credit card processing, as the name implies, allows a business to accept credit card payments in real-time with no internet connection. This method ensures your business can continue normal operations, completing transactions despite an unreliable connection.
There are two ways to process offline credit card transactions. In the olden days (around the 90s), offline card transactions were processed using card imprinting machines. These machines imprinted the embossed card details onto a piece of carbon paper.
The credit card information collected using this method is the cardholder’s name, card number, and expiration date. The CVV number is not embossed on the card; it needs to be manually recorded by the staff. All manually processed card transactions will then be sent to the bank for verification.
The other type of offline credit card processing is more modern. It involves using a POS system that has an offline mode. While the payment terminal is offline, the customer can still swipe or tap his credit card to make a payment.
But instead of sending the transaction data to the credit card network, the terminal encrypts the data and stores it until the internet connection is back up. Once the machine is online, the data is transmitted to the credit card network and the merchant’s bank. The transaction is then authorized or declined.
If approved, the issuing bank will place a hold on the card for the purchase amount. If declined, the merchant can ask for an alternative payment option if the customer is still there.
Allowing offline transactions offers several benefits to many businesses. And it’s not just because you won’t have to decline customers when card-present transactions are unable to go through. Some benefits of offline credit card processing include the following:
Whether it’s a power outage or just an unreliable connection, having an offline mode ensures that you can proceed with regular operations despite the disruption. Also, being able to process offline credit card transactions increases the business’ flexibility. When your business is more flexible, it offers convenience and improves customer satisfaction.
Offline functionality is not just helpful to brick-and-mortar locations that experience power outages and poor internet connectivity. It is also a great solution for mobile businesses, allowing them to serve customers who prefer to swipe or tap than pay with cash.
By using a terminal with an offline mode, mobile service providers, such as electricians and plumbers, don’t need to stick to cash-only transactions. They will be able to increase their sales volume and improve customer service. Other mobile service businesses include craft show vendors, food trucks, and landscaping companies.
The old-school method has several drawbacks. First, many modern credit cards no longer have embossed card details, making the imprinting machine obsolete. Second, it is a big security risk because the slips can easily be stolen or the information copied. You will need to place them in a secure place that can only be accessed by authorized personnel.
Another drawback to this offline card processing method is the risk of error. Because the transaction is processed manually, there’s a risk of writing down an incorrect amount which could result in a dispute.
Moreover, it takes time for this type of offline processing to complete. Not only will you have to wait for your money, but you also won’t know if the bank will approve the transaction until you submit the slips for processing. There’s a chance the bank will decline the transaction. Aside from a failed transaction, you can lose money from the cost of the sale.
But what about a POS system that can process an offline credit card transaction? Compared to the card imprinting machine, a payment terminal is a much better option. It is definitely more secure since it encrypts card data. Moreover, it’s PCI DSS (Payment Card Industry Data Security Standard) compliant. Still, it has the same drawback as other offline payment options – no guaranteed approval.
A business can’t be sure that the issuing bank will approve the offline payment processed on the card machine. It is still considered a pending transaction. Only when the card machine connects to the internet will it send the information and receive authorization.
Also, the payment processor typically does not offer any protection from the potential loss due to a failed transaction. It’s the merchant that carries the risk. Because of this, merchants tend to apply a transaction limit.
Placing a maximum dollar amount on transactions can prevent customers from purchasing big-ticket items. While doing this can offer some level of protection for the business, it could still lead to lost sales and unhappy customers.
Offline payment processing allows businesses to accept credit card transactions anytime, anywhere. No internet is required. This improves the flexibility of the business, increases the sales volume, and boosts customer satisfaction. While there are risks to this type of payment option, the benefits far outweigh the risks, especially since most customers now prefer to go cashless.
