With the development of computer technologies, cash payments are gradually becoming a thing of the past. Thanks to their convenience and safety, digital transactions have become a standard way of payment, even in offline shops and other business establishments. They improve customer satisfaction, add security and transparency to payment processes, and reduce risks associated with handling cash, including robberies and counterfeit money.
Since more businesses employ digital technologies, the popularity of online transactions is bound to grow. According to Statista, the global transaction value of digital payments is expected to reach 14.79 trillion USD in 2027. As a result, the need for payment processing services is also growing on a global scale.
In this article, we will define payment processing, examine its components, and review the benefits and drawbacks of its integration into custom software solutions.
What is Payment Processing?
In the context of cashless or online payments, payment processing is the sequence of steps that enable digital transactions between merchants and customers. The purpose of this procedure is to ensure the secure transfer of funds, such as mobile payments or transactions involving credit or debit cards, digital wallets, cryptocurrencies, and so on. Developing and maintaining a payment processing system is a very complex and resource-consuming process subject to strict regulations. On the other hand, integration of existing digital payment means into custom software is essential for businesses of all types and sizes. It is especially important for the retail e-commerce market, which is growing rapidly and is expected to reach 8.1 trillion dollars in 2026.
All digital payments may be roughly divided into three main areas: digital commerce, mobile POS (point-of-sale) payments, and digital remittances.
Digital commerce covers transactions made via websites or mobile apps using credit cards or online payment systems, such as PayPal. The most common example of digital commerce activity is online shopping, where customers browse goods and services and pay directly in an app or on a website.
Mobile point-of-sale (POS) payments generally involve using smartphones with mobile wallet applications or other devices with NFC chips, such as smartwatches, fitness trackers, etc. Nowadays, many restaurants, stores, and other outlets use terminals that allow such contactless payments.
Digital remittance is a new way of money transfer between countries that offers several advantages over conventional methods. Instead of going to banks or other financial institutions, customers may use mobile apps or websites that enable a secure and convenient alternative with lower exchange rates and transaction fees.
Key Components in Payment Processing
Effective payment processing requires a well-organized cooperation of several components. Here is a brief description of these components, as well as some relevant terms.
The Merchant. The merchant is the party that accepts the customer’s payment for provided or ordered goods or services.
The Customer. The customer is the party that pays or promises to pay for goods or services provided by the respective merchant.
Payment Method. The payment method encompasses credit or debit cards, digital wallets, and other means to conduct a payment operation.
Payment Gateway. The payment gateway represents a specialized service that receives, encrypts, and securely sends payment-related data to the acquirer or the payment processing company from the connected POS system.
Payment Processor. The payment processor is an intermediary company that performs and controls all technical aspects of transactions. These aspects include obligatory security procedures such as authorization, data validation, and so on. Currently, PayPal and Stripe are the most popular online payment processing systems, making them the most common choices for integration into custom software solutions.
Point-of-Sale (POS) System. The point-of-sale system is a combination of software and hardware designed to receive customers’ payments at various points of sale, such as retail outlets, restaurants, etc. POS systems usually perform other tasks in addition to accepting payments, including tracking and management of inventory, staff, sales, and more.
Acquiring Bank. The acquiring bank or merchant acquirer is a financial institution that holds the account of a business and receives payments from its customers’ accounts. To obtain the funds from a business transaction, an acquirer cooperates with the payment processor of a merchant and the issuing bank of a customer.
Card Network. The card network is the provider of payment services that processes transactions made with credit cards and enables communication between the respective banks of the transaction parties. Some card networks, like Visa and Mastercard, allow their partner financial institutions to issue credit or debit cards connected to those networks. Meanwhile, other card networks, like American Express and Discover, issue their respective cards exclusively and act as both the issuer and the acquirer.
Issuing Bank. The issuing bank holds the account of a customer and issues a credit card or a debit card as a payment instrument. The issuer authorizes or declines a transaction based on the request from the acquiring bank and the account information. According to IBISWorld, in 2022, there were 85 businesses that issued credit cards in the USA.
Payment Security. Payment security encompasses various regulations, programs, and relevant technologies to protect payment information and verify its authenticity. This aspect is mostly governed by the Payment Card Industry Data Security Standard (PCI DSS). The creation of this standard was a joint effort of several major card networks that required a more effective alternative to separate security programs in order to ensure data safety and prevent fraud. PCI DSS is regularly revised and updated to match the current challenges in the industry and design safer ways to process payments. The most recent version is PCI DSS 4.0, published in March 2022, which contains 12 main requirements described in detail on 360 pages.
How Does Payment Processing Work?
In a typical scenario, when a customer uses a digital payment to make a purchase from a merchant, the transaction process may be roughly divided into five basic steps. Here is a simplified description of the payment processing flow.
1. Interaction with the POS System
The customer interacts with the point-of-sale system at the merchant’s outlet by swiping a credit card or using contactless means. This interaction may also be performed by inputting the customer’s credit card number and a CVV code at the checkout page on an online store, for example. Then, the POS system sends data containing the required sum and the card information to the acquiring bank via the payment gateway.
2. Making Contact with the Issuing Bank
The acquiring bank receives the data from the previous step and contacts the customer’s issuing bank. Using the relevant card network, the acquirer informs the issuer about the transaction.
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The issuing bank checks the validity of the sent information, including the credit card number, the CVV code, and the card expiration date. It also checks whether the customer’s account has enough money or credit to perform the payment. If this verification is successful, the issuing bank sends the authorization code to the acquiring bank using the same card network.
4. Performing a Sale
The approval of a transaction means that the issuing bank has reserved the required sum on the customer’s account and is preparing to transfer these funds to the merchant’s account in the acquiring bank. At this point, it is assumed that the customer has paid for the ordered goods or services even though the money has not been transferred yet to the merchant.
5. Forming a Batch and Settling the Transaction
Approved transactions are handled in batches. The merchant sends the daily batch of transactions with their authorization codes to the acquiring bank or the payment processor. The acquirer requests the sums defined in the batch from the issuer, which are then transferred from the customers’ account to the merchants’ account. Also, the applicable payment processing fees are collected in this process.
Importance of Payment Processing for Businesses
Even though payment processing is one simple action for a customer, business owners have to deal with its technical and much more complicated side. However, every business owner who has already implemented a payment processing system can indicate at least several tangible benefits they witness during every money transfer. Here are only a few advantages of payment processing for businesses and their customers.
Better Service and Customer Experience
A payment processing system is a tool that significantly reduces the wait time for financial transactions from days to seconds. At the same time, the system is responsible for the quality and the completion of every electronic transaction.
Thus, when a customer buys something, they only need to make a few taps or clicks on their devices. Possibly the most convenient payment system processing feature is the additional simplicity of refund or chargeback processes.
Enhanced Security
Dealing with sensitive information like the customer’s credit card and other personal data can be stressful for business owners in all industries. Trusted third-party payment processing systems or custom ones are safe to use because they are created with all required compliances (such as PCI certificates) that ensure customer data safety from all kinds of unauthorized access.
Reliable payment processing systems use encrypted channels to eliminate the occurrence of fraudulent transactions. Features like MFA (multi-factor authentication) and others make digital payments safe for customers and businesses they purchase from.
Cost Reduction
Dealing with paper checks and cash requires more actions when it comes to sending and receiving payments. As for companies, they commonly face banking fees, secure disposal charges, and additional costs when dealing with paper checks that, let’s face it, belong in the past as a payment option.
With a properly integrated payment processing system, business owners don’t need to hire accounting staff and minimize the department to 1-2 specialists.
Better Analytics and Reporting
Third-party payment processing platforms offer businesses advanced analytics and reporting functionality. With the help of this tool, you can track all payment transactions, monitor trends and performance, as well as detect problems and anomalies. Bespoke payment processing software can have absolutely any feature a company may need to streamline its business processes related to payments.
It is highly important for every business to have payment processing integrated into their platform by skilled and experienced professionals who know what they are doing. A poorly built and/or integrated payment processing system may result in losing time, money, customers, and reputation.
Challenges and Solutions in Payment Processing Development
The most difficult challenge for developers who build and integrate payment processing systems is compliance with regulations and ensuring the highest level of security. Another challenge is the constant modernization of fraud detection mechanisms in order to keep up with new threats. And finally, software developers should provide several payment methods for modern businesses. When a business accepts several ways to pay for goods and services, it brings more opportunities and improves customer experience.
The payment processing industry has prepared a unified standard, PCI-DSS, that contains guidelines and recommendations on how to solve security-related challenges. Compliance with this standard is the primary task for software developers who have to integrate payment processing services into their custom solutions. While banks, credit card networks, and payment processors have their means to deal with the mentioned challenges, software developers should provide additional security measures in custom solutions for businesses.
Conclusion
Payment processing systems can be a bliss to businesses when implemented and integrated properly and a curse when not. Depending on the size of your business, you have two options – use a ready-made payment-processing system like Stripe or build a custom one from scratch with the help of a reliable and certified software development vendor.
Whether you need to create a bespoke one for your company or want to properly integrate one into your business software, Intellectsoft is the team for you. For over 15 years, we have provided solutions for businesses of all sizes – from early-stage startups to SMBs and Fortune 500 enterprises. We have already successfully delivered more than 600 business solutions to clients engaged in healthcare, fintech, eCommerce, logistics, hospitality, automotive, and many otherindustries.
To learn more about our expertise in payment processing and other solutions, please see our most prominentCase Studies.
If you’re looking for a team to handle your problem with payment processing integration or need specific software to boost productivity and optimize your processes, don’t hesitate to contact us and tell us your requirements so that we can offer you the most efficient and cost-effective solution.
FAQ
What are the most popular payment processing technologies for businesses?
Mobile wallets combined with NFC hardware are popular thanks to the essential roles of smartphones in our everyday lives. Android and iOS have built-in mobile payment services, namely, Google Pay and Apple Pay, with their respective digital wallet applications. Several leading global producers of smartphones have developed similar payment solutions, such as Samsung Pay or Mi Pay.
As another example, blockchain, AI, and ML have also found applications in payment processing systems and provide numerous benefits and business opportunities.
What are the most demanded payment processors for online businesses?
PayPal and Stripe are the go-to choices for online payments in the world, and they provide many resources, such as APIs and SDKs, for software developers. Visa and Mastercard also offer developers their APIs to facilitate the integration of their services into software solutions. Finally, when developing a mobile application that requires payment processing, developers should consider the integration of the digital wallets mentioned in the previous section.
The hospitality industry depends a lot on keeping customers happy, but it’s getting harder to attract and keep them. The pandemic hit this industry hard, and now market competition is tougher than ever, with competitive offerings swaying customers. Hospitality businesses are willing to spend big to win customers back. The main questions for many are: how can we stay ahead of the competition, keep our customers, and increase revenue? Keep reading—we’ve got some answers.
Customers today have so many options that getting their attention is a real challenge. It’s not easy to make them choose your business over others. What worked 10 years ago doesn’t work the same way now. Back then, people often chose businesses based on reputation. But with new types of businesses (boutique hotels, craft cafes) popping up or big enterprises getting a new strategy, expectations have changed. The good news is these businesses have shown what works: great customer service. They focus on personalizing the experience, making things easy for customers, offering loyalty programs, and using smart technology.
In this article, we’ll explore these tech strategies and show you how they can help your business grow, and double the revenue. Keep reading to learn more!
The Importance of Customer Satisfaction in the Hospitality Industry
Customer satisfaction, which equals exceptional customer experience, is the backbone of the hospitality industry. It plays a central role in driving revenue and loyalty, as satisfied customers are more likely to return and recommend a hotel, restaurant, or other hospitality business to others. In fact, a study by the Harvard Business Review found that a 1% increase in customer satisfaction can lead to a 0.5% increase in revenue. Moreover, loyal customers are more likely to forgive mistakes and continue doing business with a company, even if they experience a negative encounter.
Let's quickly review the challenges the hospitality industry is facing right now so we can move on to the solutions and our case studies.
Challenges in Hospitality
As businesses navigate the changes in the hospitality industry, there are some key areas where a little improvement can go a long way. From improving customer service to embracing digital transformation and tackling labor shortages, we’ll take a closer look at today’s biggest challenges—and, more importantly, how technology can step in to help. Let’s get started!
Poor Customer Service
Even with strong and high-quality business offerings, poor customer service can drive potential customers and existing customers away. Common issues include:
Long wait times in customer service queues (it is worth remembering that our attention spans 8 seconds, and we live in a very busy world, so quick and efficient responses are more important than ever.)
Poorly trained customer service representatives
Lack of follow-up
Services not being done properly or quickly
Recall issues that require multiple service calls
These problems can frustrate customers. But, at Intellectsoft, we believe that the right approach, combined with technology, can address them effectively.
Digital Transformation Gaps
Approximately 50% of hotels are adopting new technologies, with 43% automating repetitive tasks and 39% upgrading existing systems. Source: workstaff.app
While many businesses are adopting digital solutions, some still struggle with outdated systems and fragmented data. Legacy companies often face chaos when trying to manage their data and create new systems or add features.
Some of the recent examples include clients coming to us to create AI solutions for their services while their data simply was not ready for the advanced tasks. We advise stepping back, communicating with a company objective, and working on keeping the data clean (centralized, structured, and segmented).
When we’re asked to create advanced systems using AI, we always emphasize the importance of organized data. To train AI and build such complicated systems that truly work, you need to start from the very beginning—collecting, storing, centralizing, and organizing it. We encourage our clients to align all departments to work internally on the data so we can create a unified digital system that delivers personalized experiences.
If you’re unsure where to start with your data, we can help. Collecting feedback at various touchpoints along the customer journey is crucial for gaining insights into customer satisfaction and loyalty. Book an IT consultation with us, and our experts will guide you in mapping out a path to get more from your data and build a system that works for your business and team.
Reskilling Staff
The pandemic hit hard in early 2020, especially for the hospitality and travel industries. Even five years later, many businesses are still feeling the impact. Recruiting and retaining skilled staff has become a major challenge post-pandemic.
Reskilling to address technology’s impact is of utmost importance, as about 40% of hotel General Managers place it among their top three workforce challenges.
We strongly believe that adopting the right technology can help. For example, creating an app to train your staff not only saves time but also ensures consistency in learning. AI assistants can also work alongside your team, helping with tasks like recruitment (providing industry insights, crafting emails) and staff training. Imagine having an app dedicated to making your team’s work easier and more efficient!
How Technology Tackles These Challenges and Supports a Customer-Centric Hospitality Culture
Automation, AI, and similar technologies may threaten many. However, the debate about replacing humans isn’t about that—it’s about cooperation and working hand in hand with technology to achieve the highest standards and establish brand-new “golden standards.” Technology is here to assist staff in listening to and collecting customer insights from data.
Let’s review some of our cases to see examples of how technology helps improve customer experience and supports customer service.
Examples of Intellectsoft projects
Property management systems (PMS)
We created a web platform and mobile app that makes managing daily tasks easier and offers extra services to improve residents’ experience. It gives a clear overview of daily activities and helps with managing units and users. Residents can easily book amenities, submit service requests, and report incidents. The platform also includes features for equipment management, key instructions, workflows, and custom permissions. This makes it easier for staff to stay on top of equipment and ensure residents have all the information they need. Plus, tools like announcements, quick votes, a forum, and a community calendar help build a connected and engaged community.
Guest Experience Management App
Our next app helped our client improve their guest experience by replacing printed marketing materials and the need for phone calls with a smart solution. Now, guests can easily order in-room dining, make reservations, and interact with staff— through a simple tablet in their room. The solution includes three parts: a custom in-room tablet with a variety of services, an admin panel for hotel staff and service providers, and a backend system that connects everything together. This approach makes things easier for guests and staff, improving both convenience and efficiency.
Existing Customers First: Building Loyalty with Personalized Touchpoints
Keeping existing customers is not just a strategy; it’s well-known that retaining existing customers is more cost-effective than acquiring new ones. In fact, research shows that it costs five times more to acquire a new customer than to retain an existing one. KPMG named customer retention as the number one revenue driver for the company.
Moreover, a 5% increase in customer retention can lead to a 25% to 95% increase in profits, showing the significant impact loyal customers can have on a business’s bottom line. Retention strategies, like personalized experiences and loyalty programs, can foster long-term relationships and generate recurring revenue, ultimately making them an invaluable part of any business model.
Personalization: How Technology Can Help?
Everyone loves to feel special—it’s part of being human. In hospitality, personalization has evolved from being a luxury to an essential standard. With the right technology to manage your data effectively, you can deliver those “wow” moments that guests won’t forget.
More than half of hotel chains are already using personalization features on their websites, booking platforms, and apps, and another 39% are planning to follow suit soon. They’re tailoring experiences to fit guest preferences perfectly.
Source: Deloitte
How does technology make it happen?
CRM Systems: They help you keep track of guest preferences, booking history, and special requests so you can offer services tailored just for them.
Loyalty Programs: Personalized rewards and offers show your guests that you value them, keeping them coming back for more.
AI Personalization: AI analyzes guest data to predict what they’ll love (from room upgrades to local recommendations) before they even ask.
IoT Gadgets: Smart room features like voice-activated assistants, or temperature controls adjust to your guests’ preferences, making their stay more comfortable.
With tech-powered personalization, you’re building loyalty and maximizing the lifetime value of every customer.
Our Case Study: Smart Hotel Management & Loyalty Program
For one of our clients, we created a smart room solution, complete with a custom IoT system. Guests can use a mobile app to control services, explore amenities, and find resort information-- with a special touch to their suite type. For the client’s entertainment business, we improved their legacy software by running a full IT and code check, fixing issues, and making the system better for customers.
Along with that, we developed a mobile app for the loyalty program, allowing businesses to effortlessly reward their customers and keep them engaged with exclusive benefits.
Our solutions not only helped the client with special experiences for guests; it also improved operations, cutting costs by eliminating inefficiencies. Here's what our experts shared:
"We transitioned away from ESB (Enterprise Service Bus) systems, which previously cost millions, and replaced them with more efficient, self-managed solutions. Similarly, we’ve implemented Device Farms that improved operations and saved resources."
Leveraging Software to Increase Upsell Opportunities
Here are some examples of tech tactics that will help your team sell more and introduce new offerings to existing customers, improve overall efficiency leaving your team grateful:
Dynamic Pricing Algorithms
For finance and marketing teams, manually calculating pricing by segment to introduce your clients can be incredibly challenging. AI-powered tools can strongly optimize these strategies by analyzing your database in detail.
Upselling via Apps
Boosting revenue in the hospitality business often comes down to personalized experiences. Imagine this: a guest books a room, and then your app suggests a spa package or a room upgrade at just the right moment. Later, it nudges them to book a dinner reservation or a guided tour designed to their preferences. With apps offering these personalized recommendations during and after bookings, you’re not just increasing your revenue per guest but also skyrocketing their experience. And you do it in a sustainable way, not by speculating, but by offering what your customers desire based on their previous experiences. It’s a win-win: seamless, helpful, and far from pushy.
Inventory and Resource Management Software
Making every resource count in your hospitality business is key. Inventory and resource management software allows you to effortlessly track everything from linens to room availability, ensuring nothing goes to waste. Having real-time insights to reduce overstock, avoid shortages, and optimize operations assists sustainably keep everything under control and know what you need to focus more. It helps maximize room occupancy by aligning bookings with available resources, ensuring every room and item is used effectively. This approach leads to smarter management, better guest experiences, and a noticeable boost to your bottom line.
Adopting these strategies not only optimizes your operations but also drives business growth. Ready to discover how technology can elevate your goals? We’re here to create a tailored solution for you.
Steps For Implementing a Customer Service Technology Solution
Improving customer service in hospitality doesn’t have to be a daunting task. With the right technology, you can smooth the path of your operations, speed up response times, and elevate the overall guest experience. Here’s where you can make it happen:
1. Understand Your Needs
Start by identifying the challenges your business is facing. Are you struggling to manage high volumes of inquiries, track customer feedback, or personalize the guest experience? Pinpointing your needs will guide you to the best solutions.
2. Pick the Right Tools
Choose technology that aligns with your goals. Look for solutions that are scalable, easy to use, and integrate effortlessly with your current systems. Options like CRM software, live chat tools, or a guest experience app can make a difference.
3. Equip Your Team
Technology is only as effective as the people using it. Train your staff to make the most of the new tools, so they can deliver exceptional service and resolve issues quickly. Confident, well-equipped staff creates happy, loyal customers.
4. Keep Improving
Once implemented, monitor how well the solution works. Are response times improving? Are customers more satisfied? Regular evaluations will help you fine-tune your approach and keep things running harmoniously.
Some Tech Ideas for Hospitality Businesses
CRM Software: Manage customer interactions and preferences.
Guest Experience Apps: Delight guests with personalized experiences right at their fingertips.
Amenity Management Systems: Simplify operations for everything from room service to facility bookings.
Live Chat Tools: Offer instant support and answers.
Social Media Management Tools: Keep customer interactions engaging and organized.
Integrating these strategies will not only improve your customer service but also deliver unforgettable customer satisfaction, loyalty, and, ultimately, your bottom line. Ready to take the next step? Book a consultation with our experts.
Conclusion
To wrap up everything we've discussed, customer satisfaction and experience are at the heart of hospitality. Retaining customers is more than just keeping them around—building strong, long-lasting relationships and consistently meeting their evolving needs. By understanding their pain points and offering personalized solutions, you can inspire loyalty and drive progress. With the right technology and continuous improvement, your business can stay ahead, let go of what no longer serves you, and keep growing.
At Intellectsoft, with over 17 years of experience in software development, our expert team is ready to help. We create everything from mobile apps to full-fledged portals and systems, leveraging the latest technologies like AI, Cloud, and Machine Learning. With deep experience in the hospitality industry, we’re here to craft personalized solutions that bring your business unforgettable customer experience and retain your valuable clients.
Ready to double your revenue and level up your customer retention strategy with personalized technology? Contact our experts, and we look forward to working hand in hand with you to build or revitalize the perfect app or system for you.
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