How Payment Processing Companies Help Small Businesses

In 2020, online sales consisted of 18% of all retail sales worldwide. However, this figure is expected to reach 21.8% in 2024. As a small business, a payment processor can supplement other forms of payment and help you send and receive online payments on a secure platform. 

In addition to cash, check, and money orders, a payment processor enables you to accept major debit and credit cards for online sales and in-person transactions, which is essential if you want to expand your business and reach a wider audience. This guide will explore the role of a payment processor, its benefits, and factors to consider when doing your research. 

The Role of a Payment Processor

You might be wondering whether a payment processor is necessary for your business. If you’re just starting out, you may view it as an added financial burden instead of a key expense. However, its services are necessary if you’re interested in accepting debit and credit cards from your customers.

The payment processing company is responsible for communicating data between your bank and your customer’s bank, facilitating the transaction of funds. This happens in a matter of seconds so that the process is seamless and convenient for the shopper and the business owner. 

In addition, the payment processor imposes important security measures that can prevent fraudulent practices and chargebacks from occurring. This can help save you time and money in the long run. 

Benefits of Hiring a Payment Processing Company

The major benefit of doing business with a payment processing company is that their services can be easily integrated with the rest of your payment options. There’s no need to redo your whole business model, and it’s an easy way to boost your profitability both in-person and online. 

Adds a sense of legitimacy to your business 

It may sound like basic psychology, but accepting credit cards will make your business look more reputable in the eyes of potential customers. When they see well-known logos such as Visa, Mastercard, and American Express by your cash register or on your site, they’ll associate their legitimacy with your business, making them more likely to trust you as well.

More payment options can boost sales 

By providing a greater variety of payment options that go beyond cash and check, you’ll gain access to potentially hundreds or even thousands of prospective buyers. Since credit cards are more accessible when it comes to online platforms, this can help you attract more buyers who are interested in doing business with you.

It’s also easy to set up things like recurring payments and payment plans with most payment processors if you’re interested in doing so. 

Reduces security risks associated with other forms of payment

Sometimes, a bad check from a customer can bounce, leaving you with a headache to deal with when it comes to tracking down your payment. Credit cards tend to simplify matters because you don’t have to count out change, deal with theft of physical money, and more. In contrast, checks can take time to clear and be more trouble than they’re worth. 

On the other hand, most virtual payments take place in an instant and can be easily traced. Furthermore, by working with a payment processing platform that includes PCI-compliant data security and fraud detection, you reduce electronic threats that could impact transactions. 

Can improve cash flow 

Unlike checks and physical invoices, credit card transactions can be electronically processed and settled much more quickly. In a few business days, you’ll see the funds from your sales directly deposited into your bank account, which can speed up cash flow and help you invest that money where you need it. 

Improves your brand competitiveness 

These days, almost every business accepts debit and credit cards as a form of payment, no matter how big or small they are. By joining their ranks and seeking services from a payment processor, you’ll be able to keep up with the competition and level the playing field. 

Although physical cash isn’t going anywhere, it’s best to cover your bases and accept as many payment methods as you can to meet the industry standard.

Streamlines checkout process 

If you already have an online store, you may be able to integrate your existing payment gateway with a payment processing service. This can make checking out a lot easier since customers don’t have to use third-party processors and be redirected to another website for the payment to be made.

Other useful features include discount codes and coupons that can increase customer loyalty and the ability to create customized information forms to prevent chargebacks and security breaches. 

Can help with data analytics

Some payment processing companies also provide you with a dashboard that gives you access to valuable insights that can help you better understand your customers. This can help you predict future buying trends that can improve the shopping experience and boost profits in the future. 

Can make accounting more accurate

One of the most challenging parts of a business is keeping track of your finances. Often, payment processing companies also integrate with accounting software options that help you track sales, expenses, taxes, and more. This can improve your record-keeping procedure and free up time to focus on meeting your current business targets. 

Choosing a Small Business Payment Processing Solution 

With so many options on the market including Square, PayPal, Helcim, Stripe, and more, it can be difficult to choose the best option for your small business. Consider factors such as fees, contracts, and customer service when it comes to evaluating your choices. 

Think about hidden and visible costs

Often, the online payment processor that is the most affordable isn’t necessarily the best choice. Although you may be focused on reducing overhead costs, there are monthly fees and setup fees you should be aware of. Essentially, you should be wary of any payment processing company that promises free services or charges extremely low fees.

Some common fees include: 

  • Interchange Fee: Charged by customer’s bank
  • Markup Fee: Charged by the merchant bank 
  • Processing Fee: Charged by the payment processor
  • Assessment Fee: Charged by the credit card association 

Depending on the number of transactions that your business usually makes on a monthly basis, you may be able to save money on a special package. However, high-value or risky transactions often come with higher fees. There is also the possibility of hidden fees that aren’t immediately obvious, so it’s best to read the fine print. 

Check website integration and features

If you already have a website, you should check whether your chosen payment processor is compatible with your eCommerce platform. Not all companies provide the same quality of service when it comes to your existing site, so instead of starting from scratch, it’s best to read customer reviews to see how other users have dealt with the transition.

If there are any special features you’re after, such as shopping cart reminders, advanced encryption, and recurring payments, you should also double-check whether your chosen system includes this as part of the user experience. Some companies have flexible contract terms while others may charge a termination fee if you’re no longer happy with their service. 

Consider mobile compatibility

Not all payment processing services are equal in terms of mobile compatibility. Along with website optimization and app optimization, you should check whether your potential provider is compatible with digital wallets like Google Pay, Apple Pay, and Samsung Pay. 

More and more customers are seeing the convenience of these payment platforms, so it’s a good idea to stay ahead of the competition and ensure that you offer support for these digital platforms. By offering added convenience and security, you’ll be able to attract more buyers.  

Check customer service quality

If something goes wrong during a transaction, it pays off to identify the issue and solve it as fast as possible. Some payment processors only provide customer support in the form of emails or complaint tickets, which can be inconvenient if you’re trying to solve a time-sensitive issue.

You’re better off with 24/7 live chat support options and a dedicated customer service provider to address any difficulties you might have. There’s nothing more frustrating than paying for a service that doesn’t work, so you should ensure that you get your money’s worth in terms of live technical support and maximum efficiency. 

Consider your location and needs

Depending on where your business is located, some payment processing companies only cater to some countries and deal with a few currencies. If you have a physical location, you might also want to invest in a payment processing terminal attached to a tablet or smartphone. While some places include this as part of their package, others only deal with online stores. 

Because of this, thinking about your current and future needs is key. Scalability is also another key aspect you should consider, including whether or not your chosen provider can grow with you and provide affordable options for bulk transactions if you’re rapidly expanding.

At the end of the day, you know your business best so it’s up to you to choose the best payment processing company to suit your needs. Examining features like price, quality customer service, and the variety of features provided can help point you in the right direction. Accepting credit and debit payments can propel your brand into the future. 

If we missed anything on payment processing, let us know in the comment below!

Heron Nelson

Heron is a business blogger with a focus on personal finance and wealth management. With over 7 years of experience writing about financial topics, Heron has established herself as a trusted voice in the personal finance space. She has a deep understanding of financial concepts and strategies, and is able to explain them in a relatable and actionable way for her readers.