For eCommerce merchants, not taking card payments simply isn’t an option. Before you can accept a card payment, though, you need support from a service provider that can handle card processing for you.
You may be wondering how the whole thing works. Not to worry; we’ve got your back.
In this post, we explain what payment processing is, the role of the payment processor, and what to look for when picking a provider.
Payment processing refers to the system of receiving, communicating, and relaying cardholder information between issuing and acquiring banks to fulfill the payment process.
In simple terms, payment processing refers to all the back-end actions that enable your business to accept debit and credit card payments. The bulk of this work is handled by what’s called a payment processor. This is a third-party provider that takes care of the authorization, verification, and secure transfer of funds from your customer’s personal account to your merchant account.
Read MoreProcessing credit card payments can typically be broken into two parts: Authorization and Settlement (funding). Authorization is when you take the cardholder’s credit card account information, which is then transmitted to your payment processor. At this point, the payment can either be authorized or declined.
After authorization, your payment processor transmits a group or “batch” of authorized transactions. The bank takes the transaction amount(s) from the cardholder’s account and sees that they are moved to your merchant account.
It can sound a little convoluted. Fortunately, most of the work is taken care of behind the scenes by your processor.
Read MoreWith all of the participants and moving parts, getting started in payment processing can seem overwhelming. Part of the issue is that there are so many moving parts and different parties involved.
Obviously there is you, the merchant, and your customer. Each of you will also have your respective banks. Then there is a processor, a gateway, and the associated card network. There may be other parties involved, too, depending on the specifics of the transaction. Each player has an important role to play.
Read MoreThey may look similar, but debit cards and credit cards aren’t the same thing. Debit cards are tied to an existing account balance, which is “debited” to conduct a transaction. Credit cards, on the other hand, are tied to a line of credit.
Processing for both follows more or less the same basic outline. Though, there are some key differences. There’s pricing, for one thing; debit card processing is more likely to be based on a flat rate, as opposed to a straight percentage. Credit card transactions are usually settled faster, too, and present a slightly higher risk of fraud and chargebacks.
Read MoreConsumers constantly demand faster, more convenient payment methods. Fortunately, there are tools that can help automate processes behind the scenes, saving you time and money.
“No-code” processors make it easy to integrate processors into your existing CRM and get up and running in a matter of hours (rather than weeks). And, with service providers collecting more valuable data and rolling out more sophisticated technology than ever before, these tools stand to get exponentially more sophisticated in coming years.
With so many new technologies, however, it can be hard to keep up. That’s why it’s crucial to work with a payment processor who is evolving to match the new technology, and has the know-how to leverage gathered data to help you run your business better.
Read MoreChoosing a processing provider can be an arduous process.
Different providers’ marketing may use the same words, but they could mean very different things. Since you’ll probably be entering into a long-term contract, you need to do as much research as you can up front.
Look at fees, pricing structures, and transmission and storage security practices. Also, look at which payment methods the processor supports (beyond debit and credit cards). To help you out, we’ve created a list of some reputable providers, along with what they offer, to give you a good head start on your search.
Read MoreSome sellers carry more inherent risk than others. This could be due to their location, product vertical, sales model, or a combination of different factors. In any case, these “high-risk” merchants may need to work with a specialized processor to make payments happen.
High-risk processors are a subset of merchant payment processing services. These service providers will generally allow for greater risk exposure in exchange for higher fees to maintain the merchant’s account.
Read MoreWe’ve primarily been talking about payment cards so far. But, there is a growing number of other payment options that customers could take advantage of.
You have old-school paper checks, of course. But, there are new technologies as well, including BNPL (or “buy now pay later”), cryptocurrency, and so on. All these methods will require some sort of payment processing, but the method will vary.
Read MoreWith the exception of cash, all payment types require some sort of processing. There must be a method of reliably capturing the customer’s account information in order to transfer funds from their account to yours.
In brick-and-mortar stores, the customer will supply data via a physical terminal, using either an actual plastic card or an eWallet. Online payment information is usually keyed in by the consumer during the checkout process. These methods all have a good deal of crossover… as well as some unique quirks.
Read MoreThe security of your processing very heavily depends on your provider. One assurance a reputable provider should always offer is adherence to PCI compliance requirements, which is a set of universally accepted data security protocols.
Of course, PCI compliance is just the baseline of what’s expected. Other security techniques include tools for data encryption and server identification, and certificates that show compliance.
Read MoreChanges happen fast in the payments space. You need to continue to adapt and evolve to survive.
More players are entering the field as traditional players and banks are joined by ISOs. Consumer payment methods such as digital wallets and contactless payments continue to gain acceptance, shifting away from providers who only process payment cards.
But there’s also another factor to consider: fraud. Payment processing solutions often provide at least a minimal level of pre-transaction fraud screening, but many disputes are the result of first-party fraud, which can happen days, weeks, or even months after the transaction was processed. True fraud prevention and risk mitigation requires a more comprehensive approach.
Read MoreAs you might expect, payment processing does not come free.
“Processing fees” are made up of three separate charges: interchange fees, assessment fees, and payment processing fees. All things considered, you’ll typically be charged between 1.5% to 3.5% of the total on every transaction you process, although the exact fee will vary.
While there are numerous models and pricing tiers available, nearly all are based on one of four common pricing types: flat fee pricing, flat rate subscription, tiered pricing, or “interchange plus” pricing.
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