Payments are the backbone of your hotel business. You wouldn’t exist without them. What’s more, your hotel’s payment processing methods and technology could mean the difference between a great guest experience and a bad one.
Understanding hotel payment processing, as well as what services and technology is available to you is vital; not only to ensure a great guest experience but to also prevent fraud and maintain compliance.
With consumer demands changing day-to-day it’s important to stay up to date with the latest best practices, rules, and regulations. Read on to discover the various types of payment processing methods, payment types, and ways to stay secure.
What is Hotel Payment Processing?
Hotel payment processing refers to the system and procedures you use to take guest payments. With fewer people carrying and paying with cash, credit and debit card payments have become the norm. But this new cashless world comes with a few challenges for hotels.
Accepting credit card payments is more expensive than good old cash. That’s because when a guest enters their details online or makes a transaction at your front desk, the associated bank must issue credit - which comes at a fee (also called an interchange) for you.
The way your hotel processes payments plays a crucial role in providing a seamless, convenient experience for your workforce and guests.
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Types of Hotel Payment Processing Solutions
Credit card terminals
Credit card terminals are a more traditional way of processing hotel payments. Guests insert, tap, or swipe their debit or credit card to make payments.
Integrated property management systems (PMS)
An integrated property management system (PMS) is a specialized software solution designed to streamline and automate the management of your hotel operations.
They comprise a range of features but what makes this system relevant is its ability to integrate with your point of sale (POS) system.
This enables you to manage billing and payments across the hotel, accept multiple types of payment methods, update transaction data automatically, and provide a safer, more secure way for guests to pay.
Point of sale (POS) systems
A point of sale (POS) system is a comprehensive payment processing solution for hotels, used to take guest payments and manage sales throughout your hotel. In addition to the software itself, POS systems may combine touch-screen monitors, cash drawers, and receipt printers.
POS systems have a range of features including order, menu and pricing, inventory, and staff management as well as payment processing and reporting and analytics.
Online payment gateways
An online payment gateway offers hotels and their guests a secure and efficient way to process and authenticate online payments. They also facilitate the safe passing of cardholder data to your hotel.
These gateways are usually integrated with your POS system, allowing quick transfer of payment information between the two. They also support multiple payment methods like credit or debit cards, mobile wallets, and online banking.
Mobile card readers
When paired with a smartphone, mobile card readers allow hotels to take payments on the go. They connect wirelessly to mobile devices and enable transactions through dedicated apps.
The Most Common Hotel Payment Types
With fewer travelers carrying cash, the world is moving into a cashless era. Some hotels have even become cashless. Many guests, however, still prefer to pay with cash. Older generations and the elderly may be less comfortable making the switch from a physical currency.
Credit and debit cards
Credit and debit cards can be used in three ways:
- Card-present (CP) transactions: Card-present transactions occur when a payment card is physically present during a transaction. A guest might pay by swiping, inserting, or tapping their card. This mode of payment allows the merchant to verify the card’s authenticity which leads to a lower risk of fraud.
- Card-not-present (CNP) transactions: This is where a card is not physically present during a transaction. Instead, a guest may provide their card details electronically or over the phone.
- Contactless payments: Contactless payments have risen in popularity in recent years due to their convenience. Radiofrequency identification (RFID) or near-field identification is employed to connect cards with readers.
Direct bank transfers
Direct bank transfers - also known as wire transfers - have been steadily growing in popularity. It refers to transferring funds from one bank account to another electronically. This might be done through an online banking platform, mobile banking apps, or by visiting a bank branch.
Digital currencies or cryptocurrencies are virtual forms of money that operate independently of traditional financial systems. They rely on something called blockchain to record and verify transactions. Digital currencies offer you an opportunity to cut costs, enhance the guest experience, and differentiate yourself from the competition. But it’s wise to keep in mind that cryptocurrencies are known for their price volatility. These mode of payment may not be suitable for all hotels.
Mobile payment apps
A mobile payment app is a software application designed for smartphones. They enable guests to store payment information and make payments electronically in a quick and convenient manner. Popular examples of mobile payment apps include Apple Pay, Google Pay, Samsung Pay, PayPal, Venmo, and Alipay.
Best Practices for Keeping Hotel Payments Secure
Whether you use POS systems, integrated property management systems, online payment gateways, or all three, your guests’ sensitive information should be a top priority.
Hospitality is an industry most impacted by fraud and cybercrime. According to the American Hotel & Lodging Association, over half of all credit card fraud occurs in hotels.
In addition, when asked by Skift how concerned travelers were about the privacy and security of their personal data provided to hotels, 70.6% said they were somewhat or very concerned.
So what can hotels do to protect themselves when it comes to payments?
Make sure you are PCI DSS compliant
One of the best ways to protect your guests’ sensitive information is to become PCI DSS compliant. PCI DSS - or Payment Card Industry Data Security Standard - comprises a set of regulations for businesses managing payment card data.
While it isn’t illegal to be non-compliant, if you experience a breach and you’re not compliant, you’ll be liable and may incur hefty penalties. These range from $5,000 to $100,000 per month.
There are a few reasons a hotel may not be PCI compliant, including:
- Lax physical security
- Weak password policy
- Lack of regular security assessments
- Insufficient employee training
- Outdated software
One of the best ways to ensure you are PCI DSS compliant is to become PCI certified. This involves a full-scale audit of your company conducted by a third-party quality security assessor (QSA). It’s a long process - sometimes up to six months but the certification can be reassuring for both you and your guests.
Get rid of paper or PDF authorization forms
Did you know that most paper and PDF authorization forms are no longer PCI-compliant? This is for a few reasons:
- They are often sent back and forth over email which could lead to a compromise.
- They are harder to secure and store. Often, hotels lock them away in a drawer, but this can easily be broken into.
Hotels should instead consider switching to a digital solution such as Canary’s Digital Authorizations and Contactless Check-In. These tools help prevent fraud, improve your guest experience, and help you win chargeback cases should they ever occur.
The Best Western Gold Rush Inn switched from PDF authorizations to Canary Digital Authorizations to prevent compliance problems. Danielle Pfeifer, General Manager explains:
“We used paper credit card authorization forms for quite a while, over time it became clear this was a problem for a variety of reasons. First they were not PCI compliant, meaning if we had an instance of chargebacks or fraud it would be very hard to win that case.
“However, our real concern was data security. We were very aware that a binder full of paper forms containing sensitive data was not the ideal way to capture information and presented significant security risks.”
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Create an internal data security policy
Creating a set of guidelines and procedures for your employees can help your hotel remain PCI compliant. These guidelines should explain, clearly and simply, how to handle sensitive information. Having a good internal data security policy helps you in a few key ways:
- Defines roles and responsibilities: A well-constructed internal data security policy helps your employees understand what is expected of them. It’s a good idea to outline all payment and processing roles and responsibilities allocated to staff members.
- Establishes security protocols: Having a set of security protocols for staff to adhere to helps hotels protect sensitive data and minimize the risk of a breach. Common components of a security protocol may include data encryption, access controls, and an incident response plan.
- Provides an opportunity for employee training: Having an internal security policy makes it much easier to train staff in a consistent manner. It’s a good idea to retrain staff every year to keep the information fresh in their memories.
- Creates a culture of security: A culture of security means that staff members work with the security of your guest data in mind, no matter what they do. Internal data security policies help workers understand why this is important and give them the necessary resources.
Regularly update and review security procedures
In order to stay as PCI-compliant and secure as possible, security measures should be regularly reviewed and updated. There are a few reasons for this:
- Changing threat landscapes: The way in which cybercriminals target businesses evolves day by day.
- Compliance requirements: The PCI compliance regulations and your local data compliance laws are subject to change. This means you must stay up-to-date with recent updates and ensure changes are made within your organization.
- Technology advancements: New software or technology implementations within your hotel can mean new security risks and vulnerabilities. It’s vital to choose secure, trustworthy vendors that use PCI-compliant technology.
- Internal or external changes: As your hotel undergoes changes in personnel, roles, or responsibilities, you’ll need to update access controls and user privileges.
Create a cyber incident response plan
Creating a cyber incident response plan should be a top priority when it comes to hotel payment processing. It’s also a PCI requirement. Time is of the essence with a data breach and a response plan can help you minimize the associated impact and cost.
First, establish an incident response team. These will be individuals or groups with expertise in IT security, communications, and law. This group will take the lead should a breach occur.
The first step of a response plan should involve conducting a preliminary assessment of the incident. This will help you determine the overall scope and severity of the breach.
Next, take immediate action to contain the breach such as disconnecting affected systems from the network, disabling user accounts, and changing passwords.
Your next steps should involve notifying all parties such as customers and credit card companies, preserving evidence related to the incident, and conducting an investigation.
Finally, you’ll need to implement remediation actions and review and update your incident response plan.
Perform risk assessments
Performing a cybersecurity risk assessment is one of the best ways to mitigate fraud. This is where you assess potential risks to the security of your payment data, and then put measures in place based on the result.
First, you should identify and make a note of all payment card data-related assets. This could include payment card terminals, servers, and databases. Next, identify all potential threats such as data breaches, malware infections, or inside threats etc.,
Assess each of your assets and determine their vulnerabilities. This could involve weak passwords or outdated software. You’ll then need to determine the likelihood and impact of each threat. Rank all of the risks by order of likelihood and impact. This will enable you to resolve the most serious ones first.
It’s also important to develop risk management strategies in response to these risk assessments. This might mean adding new security controls or improving your employee training.
Processing guest payments in the most secure, PCI-compliant way possible is critical for any business. And considering the heightened risk of cybercrime within the hospitality industry, hotels should pay even more attention to the processes, solutions, and technologies they have in place.
Invest in secure, PCI-compliant solutions to reduce the likelihood of breaches, chargebacks, and other types of cybercrime.
Next up, discover everything you need to know about PCI DSS compliance.