An electronic payment terminal (EPT), or card reader, is a device connected to an automated teller machine (ATM) network, also called an “interbank network,” that lets businesses accept card payments or digital wallet payments safely and securely. The EPT’s role is to read payment information and send it to the appropriate institutions to authorize and complete transactions.

EPTs speed up transactions and reduce the risk of fraud and failed payments. They allow businesses to accept various payment methods, including mobile payments and credit and debit cards, reducing the need to handle cash.

To make full use of an EPT, it is important to understand how it works, from installation to settlement of funds in a business account. In this article, we’ll go over how to use an EPT and how providers such as Stripe help businesses accept payments.

Key takeaways

• The three main steps to using an EPT are: initial setup, payment process, and settlement.
  
• To set up an EPT, businesses must have an electronic payments contract, a direct deposit card, and phone or internet service.
  
• Transactions involve several steps: the cashier enters the total, the customer holds the card or digital wallet to the EPT, the EPT reads the secure card information, the customer authorizes payment, and the EPT displays payment confirmation (if the payment is accepted).
  
• The EPT groups all transactions made during the day and sends them to the bank, which credits the funds to the business’s bank account.
  

How an EPT works: The basics

There are three key steps to using an EPT: setup, payment process, and settlement. EPTs must be connected to an interbank network via an electronic payment gateway to collect payments by bank card or digital wallet. The gateway acts as an intermediary between the EPT and financial institution servers to secure authorization, processing, and transfer of funds to a business account.

Installing an EPT

To install an EPT, a business must have an electronic payment contract with a financial institution (e.g., a bank) or a payment services provider (PSP), such as Stripe. The business receives a direct deposit card, which is used to configure the EPT and connect it to a business bank account. A certified organization is typically responsible for configuration.

To pair the EPT with the payment gateway, businesses need one of the following types of connections:

• Landline: Each transaction is billed like a phone call. This can be a good fit for businesses just starting out and with a low volume of sales, but it can be slower than other solutions.
  
• Internet: Either Fiber to the Home (FTTH) or Asymmetric Digital Subscriber Line (ADSL) can be used. In either case, it’s recommended that businesses have a separate internet service dedicated to the EPT for bandwidth and security reasons. With a dedicated line, an internet connection tends to be a better, faster solution for businesses—particularly those that process higher volumes of in-store transactions.
  
• Mobile data: To use a mobile data connection—such as General Packet Radio Service (GPRS), 3G, or 4G—the EPT needs to be equipped with a compatible subscriber identity module (SIM) card. Mobile data connections offer maximum flexibility for mobile businesses, sometimes called “itinerant traders,” that want to collect payments without Wi-Fi or Bluetooth access.
  

Once the EPT is set up, the business can begin accepting payments.

Accepting payments using an EPT

EPTs can be used to accept payments quickly and easily. Here’s what the process looks like, step by step:

1. The cashier enters the transaction amount on the register or EPT keypad.
   
2. The customer inserts their bank card, or, for contactless payments, taps it against the EPT. They can also hold their mobile device to the EPT to pay with a digital wallet.
   
3. The EPT reads the sensitive information stored on the card, which is immediately encoded with the Payment Card Industry Data Security Standard (PCI DSS). The customer then authorizes the transaction by typing their personal identification number (PIN) into the EPT or by using biometrics (e.g., fingerprint, facial recognition).
   
4. The electronic payment gateway sends the authorization request to the customer’s bank via an internet, mobile data, or landline connection.
   
5. The customer’s bank automatically performs the necessary verifications (e.g., funds availability, authorized spending limit, fraud protection measures). It confirms or rejects payment based on these verifications.
   
6. Finally, the EPT displays the result and prints a receipt or sends the customer a text or email to confirm the transaction.
   

Collecting funds from an EPT

Businesses collect funds accepted by an EPT through a procedure called “settlement.” Throughout the day, the EPT stores a record of all transactions locally. At the end of the day, the device automatically sends transaction information to the business’s bank or payment method provider.

At settlement—which occurs at a specific time determined by the financial institution—the bank credits the funds to the business’s bank account. Funds are typically deposited within one to two business days.

How Stripe can help

Stripe Terminal allows businesses to grow revenue with unified payments across in-person and online channels. It supports new ways to pay, simple hardware logistics, global coverage, and hundreds of point-of-sale (POS) and commerce integrations to design your ideal payments stack.

Stripe powers unified commerce for brands like Hertz, URBN, Lands’ End, Shopify, Lightspeed, and Mindbody.

Stripe Terminal can help you:

• Unify commerce: Manage online and in-person payments on a global platform with unified payments data.

• Expand globally: Scale to 24 countries with a single set of integrations and popular payment methods.

• Integrate your way: Develop your own custom POS app or connect with your existing tech stack using third-party POS and commerce integrations.

• Simplify hardware logistics: Easily order, manage, and monitor Stripe-supported readers, wherever they are.

Learn more about Stripe Terminal, or get started today.