Regardless of the size of your company or the products you sell, one of your most important tasks is to figure out how you will be compensated for what you do. If you plan to accept credit cards or debit cards or digital payments – and why wouldn’t you? – this means getting connected with a payment processor.
But just what is a payment processor, how do you find the right one, and what advantages can it bring to your small company?
Payment processors defined.
A payment processor acts as a middle entity between the customer’s bank, the merchant, and the card network, in order to enable that merchant to accept online or in-person payments. It facilitates the transaction, allowing for the acceptance of various payment methods.
Although purchases are usually completed in a matter of a few seconds, a great deal goes on behind the scenes to ensure maximum accuracy, efficiency, and security. In large part, it is the payment processor who makes this seamless interplay happen.
This provider is essentially the intermediary between the customer’s bank, the merchant, and the other entities in the payments universe. In the end, it is they who see to it that you receive the funds from the purchase to which you are entitled, minus a fee.
In sum, the payment processor performs three functions. First, it handles credit and debit card transaction processing from start to finish. Second, it helps to prevent security breaches by implementing anti-fraud measures. Third, it facilitates the settlement of funds, enabling merchants to get paid in a timely manner.
How payment processing works.
Payment processing involves several steps: authentication of customer payment details, authorization of the transaction, and settlement of funds.
For a payment to be completed, the processor guides it through a series of steps.
First, it is vital to make sure that the customer’s account is legitimate. Regardless of whether the payment is made in-person or online, its details are sent to the bank that issued the customer’s card to verify accuracy. This helps to prevent fraud.
Next, the customer’s bank either authorizes or declines the transaction. To do so, it uses information such as credit limits or account balances. If approved, an authorization number is generated and sent to the merchant.
Finally comes settlement, which can occur manually or automatically. Often, a batch of authorized payments is settled all at once for maximum efficiency.
Types of payment processors for small businesses.
There are two basic types of payment processors for small businesses: merchant account providers and payment service providers. Each has its advantages depending on the type of business to be served.
Since not all retailers are created equal, it stands to reason that there is more than one type of payment processor. Merchant account providers furnish a small business with its own specialized account into which funds can be deposited until after settlement.
At that time, the merchant can move the money into their standard business account. Although there is a greater degree of control over the payment process, merchants can expect more complex and costly setup and fees.
On the other hand, payment service providers aggregate merchant accounts. In other words, each business does not have its own separate one. This makes for ease of use and setup, albeit with less control and customizability.
Tips on finding the best payment processor.
When deciding which payment processor is right for your business, there are several issues to consider. Focus on affordability, features, easy integration with your other software, a full range of payment choices, transparency, and excellent customer service.
Not surprisingly, there is a massive selection of payment processors from which to choose. Although you should not necessarily pick the cheapest one just because of its price, affordability obviously should be a consideration.
That being said, don’t compromise on the features that you need. The system should work seamlessly with your existing software such as accounting packages. Moreover, you should be able to configure it to take a variety of payment types in keeping with your business and customer demands.
Prioritize transparency, making sure that all of your questions have been answered and that there are no hidden fees.
Finally, investigate thoroughly to be sure that the company’s customer service is responsive, knowledgeable, and multi-channeled. After all, if you encounter a pressing question or problem, you need it to be solved right away to minimize downtime.
What a payment processor can do for your business.
The right payment processor can elevate your company in many ways. It can provide fast transactions, a positive customer experience, accuracy in record-keeping, high security, expanded reach, reduced paperwork, cost-effectiveness, and analytics.
Ensuring a safe and reliable influx of cash is vital for small businesses, and finding the right payment processor in order to accept credit cards can help to make this happen. Do careful research now to find the vendor that best meets your business’s needs, and you will soon see the benefits.
For starters, the fast and accurate payments you receive let you have more immediate access to your cash. Additionally, the variety of payment choices that you can offer to customers leads to higher satisfaction and a better overall experience.
Accuracy and security are also vital. Information is processed automatically, reducing human errors. Digital payment methods foster an overall more secure payment environment.
Furthermore, your customer base can be expanded exponentially now that you can take payments safely from anywhere. All the while, paperless invoicing brings about better record-keeping with a lower impact on the environment.
A good payment processor is also cost-effective since you can cut back on bank deposit fees and eliminate the cost of manual processing.
Finally, the systems provided by your processor can assist you in gaining valuable insights into sales trends and customer behaviors. These can be invaluable as you plan your next marketing strategy.
Payment processing should be one of the main bulwarks of your small business. Dedicate time and careful attention to it now, and it will bring numerous rewards to your company and the customers you serve for many years to come.
