Understanding Payment Processing for Vacation Rentals
Let’s start with a definition. Payment processing is how businesses complete credit and debit card transactions and essentially collect payments. This form of payment is used by millions of people on a daily basis, and touches every aspect of our daily lives, yet very few people fully understand the process in its entirety. Receiving a payment happens in seconds but so much happens behind the scenes.
Fun fact: One of the first companies to execute an online payment was Pizza Hut in 1987, when they made it possible for consumers to order pizza delivery on their homepage.
In this blog post we will explain what goes on behind the scenes when a payment is made, and discuss the benefits of a payment processor that understands your business.
In the case of vacation rental payment processing, the customer is the guest, and the merchant is the vacation rental or property management company. The product or services refers to the accommodation and any other additional services (such as early check-in/ late check-out) that the guest wishes to purchase.
Step 1: Customers select the product or service they wish to purchase and proceed to checkout.
Step 2: They choose their preferred payment options, like credit/debit card, e-wallet, or wire transfers.
Step 3: Payment information is collected and sent as encrypted transaction data to the payment processor. This is enabled by a payment gateway, a consumer-facing interface used to collect payment information. With online payments, the payment gateway comes in the form of a checkout portal, where credit card information can be entered. The gateway securely transmits data to the payment processor, so money from the issuing bank (the customer’s bank) can be transferred to the acquiring account (the merchant’s account).
Step 4: Transaction details are sent to the issuing bank for authorization.
Step 5: Issuing bank authorizes the payment.
Step 6: The acquiring bank is informed about the payment authorization, and facilitates all electronic payment transactions on behalf of the merchant.
Step 7: Funds are transferred from the issuing bank account to the merchant’s account.
The agreed amount of funds to be transferred is called the settlement. Another term commonly associated with this step of the process is merchant processing.
Online payment processing for property managers
Every professional property manager needs to have secure and efficient ways of accepting online payments.
How do you choose one?
The payment processor you choose will depend on the property management software you’re using. For example, Guesty has its own in-house payment processor, GuestyPay (US only). We created GuestyPay specifically for property managers and vacation rental companies operating in the hospitality industry. It’s currently only available in the US, but coming to the EU and UK later this year.
Guesty’s best-in-class technology can identify the unique trends and behaviors of travel merchants and their guests. This translates to helping reduce fraud, increased acceptance rates, and mitigating risk.
A lot goes on behind the scenes when a payment is made, understanding how this works will help you make the right decision when it comes to choosing a vacation rental payment processing solution.