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Understand Electronic Payment Methods (EPM)

Put simply Electronic Payment Methods, or EPM, are money exchanges where traditional currency is not used and the medium is electronic in nature. If you have a credit card terminal and swipe a credit card through it the terminal reads the magnetic stripe and encrypts the data, dials out to the processing network (Visa or MasterCard for example) using the phone line like a fax machine ensuring funds are available. Finally the terminal records that information in it's memory should it succeed in authorizing and not be voided by the terminal operator.

Each transaction is then placed in a "batch" within the terminal which is simply transactions that haven't been sent to the processor to be settled. At the end of your business day you would "batch out" your terminal meaning the terminal will dial out to the processing institution to settle all transactions in it's memory. This is essentially telling your processing institution that you are sure you want to process the following transactions and to please deposit them into my bank account. Most businesses choose to have their terminals automatically batch out at a certain time each day, also known as "auto closing.”

Similar events occur when you use pin based debit cards, or check readers. The difference between them is that the method of authorizing changes, in the case of a pin based debit card the customer has to provide their pin number to allow the transaction. This transaction dials out like a credit card transaction but to a different network and in most cases non credit card EPM transactions require additional equipment. The advantages to this is that it costs you less money to process pin based debit since the fee is much lower, given to the more secure nature of a pin number and monies coming from an account rather than on credit.

Online transactions differ slightly as there is no device per se between your customer and the processing gateway beyond the website and it's processing software. Through this method the authorizing and batching of the transaction takes place at the same time, settling can also be automated or manually handled through the software. The behavior of settling varies, using our software the default is 8PM PST but you may set it to any time you wish or set it to be done manually if you prefer. The drawback is that these transactions are fairly anonymous and handled without the credit card itself being present which adds to the inherent risk of the transaction. Options like AVS (Address Verification Service) and Card Verification Code (aka CVV2 code) are essential to prevent fraud and enables you to receive a greater discount in processing the transaction.

Next we would like to teach you more about rates, fees and choosing the right processor. Click here to learn more.