Restaurants and other merchants have many decisions to make in the complex world of electronic payments.

Choosing your processor may be among your most important decisions. Processors operate the computer systems that authorize and settle card transactions, and they make sure the money is deposited into your bank account.

Georgia Stavrakis, vice president of compliance with Heartland Payment Systems, calls processors the "technological engines” that power electronic transactions. Like a locomotive, a processor carries transaction data over the rails and switches of a vast payments network.

Processors secure the payments process by ensuring transactions adhere to rules set out by the Payment Card Industry Data Security Standard for Merchants and Processors (PCI DSS). Many processors offer additional fraud protection, and some provide analytical services to help operators identify customer trends and target their marketing.

Choosing a processor

There are a myriad of players in the processing space, so it’s important to understand how processors and acquiring banks – the bank that receives payments on a merchant’s behalf -- work together to facilitate payments.

Many acquiring banks sell processing services as an adjunct to their banking services. In some cases, independent sales organizations (ISOs) serve as middlemen, selling services on behalf of acquirers.

Larry Godfrey, vice president of U.S. product at Heartland, says you should try to minimize the number of players involved in your transactions. “Some processors aren’t big enough to have their own authorization and settlement platforms, so that creates another step,” he says. “They’re leveraging someone else’s service. Costs can spiral when there are more parties in the process.”

Find out how many middlemen are involved in your transactions, he says. Chances are, each one is assessing you a fee.

Equipment considerations

Processors provide the software used to accept card and mobile payments while equipment providers supply the hardware. Taken in total, these devices have changed significantly with the introduction of EMV, or chip cards in the U.S. market. Do you need a PIN or signature keypad? A stand-alone terminal? Does it integrate with your point of sale system?

Beware of vendors, Godfrey says, who want to lease you equipment. “Terminals are available today for about $300, so there’s really no reason to lease one. I’ve seen lease agreements that amount to thousands of dollars for just one piece of equipment. They are generally not a good deal.”

The EMV liability shift has forced merchants to decide if they will accept chip cards and invest in equipment that can read EMV data. Smaller operators continue to struggle with whether to convert their systems, which can be expensive if their chargebacks are minimal.

“EMV transactions are exponentially more complicated than magstripe transactions,” Godfrey says. “Many of the more traditional point of sale systems are not capable of handling EMV. In many cases today, the payment applications are running on the devices themselves rather than through the POS. That’s what’s known as a semi-integrated approach and one that operators should think about.”

The cost of processing

Perhaps the most complicated and often confusing aspect of payments for operators is the cost, how it is calculated and how transparent the fees are. There are various pricing models, but the two that seem to be most popular are flat rate (bundled) and interchange plus.

  • In flat-rate pricing, all of the fees — including interchange — are bundled into one monthly price.
  • For merchants who want more transparency and the confidence that their processor isn’t excessively marking up fees, “interchange plus” has become a popular pricing model. Interchange plus lists the interchange fee charged by the card network for each transaction and the additional charges passed on to you, which include card brand assessments and processing fees.

“Ask your processor to explain the fees, and be on the lookout for processors that pad their fees or won’t pass along reductions in the interchange rate,” says Godfrey. “You can always validate the interchange rates by going to the card brands’ websites where the rates are published. Also, beware of processors that offer a low, introductory rate, then gradually raise their rates.”

Operators should also pay attention to any contracts they sign, so they aren’t locked into high fees they can’t get out of. Be sure to check if there are early termination fees and a waiver if your establishment goes out of business.


Restaurants have lots of credit card data — which makes them a target for hackers. A good processor can help protect your restaurant by providing fraud monitoring, data encryption and tokenization. A relatively new technology, tokenization replaces sensitive card data with an algorithm that cannot be exploited by cyber thieves.

When card authorizations are tokenized, they can be safely stored by an operator and used as a transaction reference. This allows operators to create loyalty programs without fear of customer data being compromised.

Be sure to ask about data security and protecting against data breaches when talking to processors.

Other considerations

In addition to cost and security, here are some other questions you should ask when selecting a processor:

  • Do you have real-time, 24/7 customer support, and are you locally based?
  • Do you process multiple payment options such as rewards cards or PayPal?
  • How do you keep up with innovations in processing? How often do you upgrade your software?
  • Do you provide data analytics services?
  • Do you have experience in the foodservice industry? What other foodservice clients do you have?

This post is sponsored by Heartland, a Global Payments company that delivers fast, secure omnichannel payment processing and business solutions to more than 400,000 business locations nationwide. Product offerings include payments, payroll, point of sale, customer engagement and lending. Heartland is an endorsed partner of the Association.