For small business Payment Processing can be a complicated and pricy experience. Accepting credit cards and mobile payment is now the norm in order to compete. However, a lot of small business owners don’t really know where to begin.
Searching Google can help you tell you that your bank offers a merchant services account, or an acquaintance can give you a tip on a solution that works for them. But at the end of the day, you need to do a lot of research because your business is totally different.
The payment processing industry is not as easy as it looks, it is hard to choose a solution without doing research. This means long contracts, high rates, and lackluster customer support for many small business owners. Below are ways to keep away from those and get the right solution for your small business.
Start with basics
There are many things going on in the world of payment processing. The parties, the terms, and complicated percentages can get very confusing for a lot of people. Before you jump on a call with a sales agent, here are some key terms you need to get familiar with.
– Merchant Service: A category of financial services that allow businesses to accept credit card payments. If you want to accept other modes of payment other than the cash you need a merchant service account.
– Independent Sales Organization: A third party company that banks authorized to handle merchant services accounts for businesses. Your bank also offer their own merchant services, however, you can experience more personalized customer support, lower rates, and more advance tech with ISO’s
– Card Association: VISA, MasterCard, Discover, and AMEX are the governing bodies, not the banks. They are the ones responsible for things like setting interchange rates, arbitrating between issuing and acquiring banks and maintaining and improving their card networks.
– Interchange: Interchange is a charge in exchange for businesses to be able to receive their cards. It is the lowest possible cost of accepting cards, however since business owners never deal with the card association directly, there are a lot of ways that ISOs and bank charges added on the interchange for their services. You have to take note that every business owner needs to pay interchange, no matter who you process with.
Price model that is right for you
Each processing seller charges its merchants differently.
– Markups: It can come in percentages or a flat rate however, the concept is still the same. You have to pay a percentage on top of their interchange. So the more you process, the more you pay to your merchant services provider. Though this could be a good model for small volume businesses, and as you grow so is your processing bill.
– Tiered Rate: This is possibly the most expensive of the three listed. The processing company created three tiers; Low qualified, mid-qualified, and qualified. Each tier will have a corresponding price and some of your processes will fall in certain tiers. Because there are no regulations, providers will take the most popular cards and put them on a higher tier and that makes processing on this model costly.
– Subscription: This model will come with a monthly membership for accessing the direct cost of interchange. So there’s no variation based on how much you process. All you need to pay is the membership and the direct cost of the cards you’re running that month. You can think of this model like Sam’s Club or Costco: You are only paying for access at the lowest cost possible. The savings on this model is huge.
It’s not just about the price
The bottom line is important, no doubt about it. However, if it’s about payments, you cannot just decide based on the price alone. There are a lot of factors to consider and if you made the wrong decision will have a big impact on your small business. So when you evaluate a certain payments provider, you have to make sure to check their offerings and consider it carefully before signing with them. Here are some things you need to check.
– Technology: Do you have both physical and online stores? If you do, you don’t want them processing on different vendors. So, check your sales conversion with a payment processing provider and understand if they can offer what you need. You have to check and analyze your sales data because that will show you a lot about your business. Having that all in one place will make a difference no matter how many modes of payment you accept. Some of the providers also give data analytics service and reporting, you can see how important that offering is.
– Customer Support: Processing a payment is very important. If you cannot accept payment for a purchase, it will affect your business and day operation. This is unavoidable, there will be problems. However, you can avoid and choose the one to have your back when those issues occur. A payment provider who has in-house, devoted support can actually make a big difference.
Making sure you have the right knowledge and details will help you with your decision when choosing a payment partner. This decision will have a big impact on your business. So, you have to make sure that you look at these factors, evaluate your needs and what they offer before choosing one.