Offline Payments: What Are the Risks?

As credit card payments continue to dominate the transaction landscape in the United States, it’s more important than ever to ensure your brick-and-mortar business can accept digital payments. 

Most POS terminals require an internet connection to facilitate credit card transactions. Your business’s internet connection allows communication with the credit card issuer, credit card processor, and other verification platforms to determine if you should accept a payment. This process happens instantaneously, which leads us to forget how vital this internet connection is in facilitating credit card transactions. 

So, what happens when you lose your internet connection? While some payment terminals use mobile networks to reduce the chances of an outage impacting transactions, there’s no guarantee that your local mobile network won’t also experience outages. 

This is where a new feature comes into play: Offline payments. Some payment terminals now allow you to accept offline credit card transactions. So, what’s the catch? While there’s no doubt this is a valuable feature for many business owners, there are some downfalls. In this guide, we’ll take a closer look at offline payments, how they work, their risks, and their advantages. Let’s get started!

How Do Offline Payments Work?

Offline payments are simple for POS platforms that offer this feature. When a payment is made that cannot be immediately processed via an internet connection, the card details are stored, along with the transaction details. When connectivity is restored, the transaction will automatically process. 

Due to the nature of offline payments, there is typically a maximum transaction amount, and this prevents large fraudulent transactions from occurring when an internet connection is not established. 

Keep in mind that not all payment platforms allow for offline payments. If you want to accept this type of payment, it’s critical to make sure your POS provider has this feature. Additionally, your customer’s card will need to have offline payments enabled. 

Risks Associated with Offline Payments

Unfortunately, there are some downsides to accepting offline payments. Let’s explore some issues that can arise after an offline transaction:

  • Insufficient Funds: If the customer does not have enough funds in their bank account, the transaction will decline when you restore your internet connection.
  • Lack of Fraud Detection: Without a connection to the internet, your payment processor and POS provider won’t be able to provide the same level of fraud detection, which can lead to you accepting fraudulent payments. 
  • Chargebacks: If you accept a fraudulent payment, you will likely receive a chargeback that will result in a loss of the transaction’s funds. This can also lead to issues with your merchant account. Merchant account providers typically require you to keep your chargeback rate below a specific threshold.  

It will be your business that suffers the costs of the above issues. Therefore, it’s essential to consider your exposure to the downsides of offline payments before you use it as a feature in your business. If you’re a business that consistently deals with fraud and chargebacks, offline payments may create further vulnerabilities. 

Can POS Systems Log Offline Payments?

While much of the discussion around offline payments centers on payment processing platforms, it’s also critical to address its relation to your point-of-sale terminal. If you’re using a modern POS platform to facilitate transactions in your business, it will likely have no issues logging offline payments.

Technically, cash is an offline payment. Your POS system will record the transaction details in a similar fashion, regardless of whether the card payment is finalized immediately. This means that offline payments won’t impact your POS reporting.

Advantages of Offline Payments 

While there are undoubtedly risks associated with accepting payments without an internet connection, there are many benefits. The associated advantages of offline payments have made this feature extremely popular with many business owners in the United States.

Let’s explore the benefits of accepting offline payments in your business:

  • Remove Issues Associated with Patchy Service: If you want to process credit card transactions seamlessly, offline payments allow you to accept payments at all times. This is especially beneficial if you suffer from frequent Wi-Fi or 4G outages. 
  • Avoid Disappointing Customers: There’s nothing worse than disappointing your customers. If a customer is excited to purchase a product or service from your business but cannot do so because of connectivity issues, this can reflect badly on your business. 
  • Accept Payments in Inconvenient Locations: If you’re operating a mobile business that accepts payments in locations without internet connectivity, offline payments can be a helpful tool. 

Choose What’s Best for Your Business 

Now that you understand the pros and cons of using offline payments, it’s time to decide if you want this transaction option for your business. Consider your exposure to fraud, chargebacks, and other related issues before you enable offline payments. While this is a useful tool that helps many businesses throughout the United States, it’s not without its downsides. 

If you’d like to read more about POS platforms and their features, make sure to explore our other blogs at POS USA. We have a range of reviews and guides available to our readers. We’re here to help you get the most out of your point-of-sale terminal!


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