The Dangers of Offline Card Processing (and What to Do Instead)

The following is a guest post by Tiffany Rowe. Tiffany is a Marketing Administrator at Seek Visibility, where she assists clients in contributing resourceful content throughout the web.

Thanks to Square, Paypal Here, Intuit GoPayment, and a handful of other mobile payment processors, small sellers everywhere have the ability to accept card payments at all times. In many ways, these tools have been revolutionary: They help entrepreneurs make all sorts of transactions, boosting the economy and helping small businesses grow fast.

Unfortunately, many of these mobile payment solutions – and even some traditional card processing services – are beginning to offer “offline” services, which some vendors are taking advantage of in non-connective situations. While mobile card processing is wonderfully beneficial, offline card processing is exceedingly dangerous and should be avoided. Here’s why.

Why Offline Card Processing Is Bad

For many merchants, this scenario is a familiar one: A customer sweeps into the store, makes a head-spinningly massive order, and wants to pay for everything upfront using a card. Eager to please such an excellent customer, the cashier graciously tries to approve the transaction as quickly as possible – only to discover the processor is offline.

With offline card processing, the solution seems to be simple: The cashier can log the transaction anyway, allow the customer to leave with his or her purchase, and the processor can take in the information when it comes back online. Ostensibly, the customer leaves happy, having obtained his or her order in a timely manner, and the store benefits from a large sale.

However, this isn’t the only outcome. It is incredibly likely that some mishap occurs; maybe the card isn’t valid or the charge is denied for some reason. Maybe the customer charged the amount back, disagreeing that the transaction took place. There is no way for the merchant to know the sale will go through until the card is processed and accepted, which could be hours or days later. Then, the merchant is left with a significant loss – or, at best, fighting their processing company in an effort to prove the transaction was legitimate.

Offline card processing is as risky as taking customer IOUs with nothing but a verbal promise. Instead of participating in this dangerous practice, merchants should choose more secure methods of managing their transactions.

What to Do Instead of Going Offline

Fortunately, there are alternative solutions to help merchants who can’t access their online card processors. Here are the three most widely available and easy-to-use options:

  • Automated Clearing House. Typically shortened to ACH, this solution is ideal for merchants who maintain close customer relationships. Instead of collecting payments in person, merchants can bill their customers electronically. ACH processing fees are less expensive than fees for debit and credit cards, and payments are processed in batches for speed and efficiency.
  • Checks. Ultimately, debit cards and checks pull money from the same place, so legitimate customers should not be overly concerned with your request for a paper check rather than a plastic card. However, you must continue to be vigilant for fraud when handling paper checks, verifying names and signatures and looking for signs of tampering.
  • Cash. While countries like Sweden and India are trying to get away from a cash economy, merchants should campaign to keep cash in the U.S. No matter what systems go down, a merchant can always accept dollar bills and coins in exchange for goods and services. Plus, thanks to updates to currency, cash is exceedingly difficult to counterfeit; thus, it’s improbable that a merchant will take a loss by accepting cash.

When Offline Card Processing Is Acceptable

Of course, merchants should never say never. Just because offline processing is dangerous in most situations doesn’t mean anyone should prohibit the practice in all situations. There are some scenarios in which offline card processing might be well worth the risk.

Businesses that must move customers through check-out quickly to provide high-quality service cannot waste time processing and authorizing every single card in real time. In this case, the money lost by delaying each customer by a minute or two is likely substantially more than the money lost to fraud. Fast-casual restaurants often find offline card processing more profitable than the slow, secure alternative.

Still, the vast majority of merchants should think twice before automatically agreeing to offline card processing. Usually, there is more to lose than to gain by delaying payment.

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