Businesses grow with consistency, dedication, and efficiency. The merchant and their employees manage the consistency and dedication as much as it depends on them. For efficiency, the merchant can use effective, tested, and trusted systems that help bring this expected efficiency to life. One of the systems is the payment processor.
A payment processor handles all your transactions for a booming business. How? The payment processor is in charge of receiving cashless payments made with cards. It communicates the information from your customer’s card details to your and your customer’s bank. In this course, security measures are checked to ensure that every data registered in the customer’s name is accurate.
The payment gateway links your account and the processor to the card company, which could be American Express, MasterCard, or a visa card. They are easy to use and serve online credit card processing for small businesses.
Hence, about five to six major teams participate in payment processing for maximum results and successful transactions. Namely; the system itself (payment processor), the business, the customer, the business bank, the customer’s card company or bank, and the payment gateway (which is sometimes joined with the processor).
One thing is for sure, as swift as the payment processing system is, there is one language every user knows associated with the payment processor, and that is the fees that come with the services rendered. Some of these fees are sign-up and annual fee, statement fee, monthly fee, gateway fee, chargeback fee, equipment lease charge for card processing, transaction fee, termination fee, and others.
Different payment processors
You must understand the different payment processors to decide which one is right for you. The reason there are options to choose from is for you as a brand to compare and contrast, then decide which one works for your business. Although no processor is superior to the other, the way each is structured and run differs.
The bank payment processor
This processor’s analysis can be drawn from how your bank treats you. Does your bank offer you lower rates in your day-to-day transactions? Do you get impeccable customer service from them? Banks would want to strictly follow a rule, maintain market margin, and spread like wildfire throughout their other branches while focusing on a good image.
That is to say, they may not prioritize their customers’ needs and may be slow to constantly changing with processors. For some business owners, they would prefer to stick to the bank’s existing state of affairs as long as they get it done, while others who want to continue impressing their customers and keep up with their demand may choose another processor. This does not discredit the bank processor for maintaining the same status quo used in the rest of their affairs.
The high-risk processors are available to mostly high-risk businesses. High-risk businesses are businesses appraised to have higher chances of budgetary/investment failure. They have heightened chargeback risks or fraud. This is likely to cause problems between the issuing bank and the processing company.
The card processing company, having accessed the business by several calculated factors such as sales volume, returns, etc., and picked out by the merchant category code (MCC) will consider the business a substantial, risky one since it is above the average business risk. Examples of such a business are online gaming, cryptocurrency, casinos, and so on. Yet, there are high-risk payment processors ready to attend to these businesses.
Retailers selling services to merchant
As the name implies, retail. They are resellers that provide merchant processing as the back-end processors’ representative. The front-end processors are connected to different card types, and they organize approval and settlement services to the merchant bank. So, the back-end processors receive from the front-end processors the settlement. They then transport the money to the merchant bank from the issuing bank.
They provide coordinated payment solutions. They are primarily an online run service provider. An example is Shopify. They do not give lower rates because their profit comes from increasing the margin of their current processor’s partner.
Payment Facilitators or third-party payment processors
A payment facilitator, a payment aggregator like PayPal offers a labor-saving service. Their pricing could be higher to make up for the high risk they take in satisfying customers without using too much customer information.
The Merchant Service Providers and Independent Sales Organizations
The MSP and ISO resell the processor’s product. Their pricing/rates change from time to time without warning. One minute you are getting lower rates, and the next, there could be a sudden rate change too high to ignore. Usually, they showcase lesser processing fees, unlike others, while infusing junk fees.
It is well understood now that different businesses will require different payment processors and partnerships with the numerous processing companies. You can choose which is more appropriate to help move your business forward.