Entrepreneurs must wear various hats to ensure their entity remains relevant and keep its doors open. This is especially critical in a day and age dominated by digital commerce and ever-evolving technological perks. Therefore, you ought to be aware of all the suitable tools to gain a competitive edge in the market.
What’s more, the unrivaled growth of eCommerce has seen a rise in online payment gateways. More efficient and seamless payment options are ever-emerging, thanks to the innovative integrations of advanced solutions, adaptive technology, and vast customization. It’s vital for businesses of all sizes to match their pace with this ever-dynamic industry and provide their clientele with the most seamless service.
Unfortunately, settling for the ideal payment processor can be intimidating, especially for startups and SMEs. It gets more complicated, considering there isn’t a hard and fast rule in determining the perfect payment processor. Instead, a suitable one for your startup depends on your unique needs, priorities, and budget.
This post elucidates more on payment processors and highlights the key factors to help you evaluate and select an appropriate eCommerce payment gateway.
Understanding payment processors
A payment processor is a firm that manages your transactions so that customers can purchase your products/services. It allows your startup to accept credit cards, debit cards, and ACH payments from its clients. Payment processor companies act as mediators between the bank and merchant, from the initial verification of card details to approval, transfer of funds, and ultimately, ensuring your startup receives funds on time.
Payment processor services, as discussed in this post, should offer equipment for card acceptance, security guarantees, PCI compliance guidance, customer support, and other enhanced payment processing services.
Note that not all payment processors offer payment gateway services. A payment gateway facilitates purchases in the absence of a credit card. For example, Stripe and Square are potent and prevalent payment gateways that allow customers to enter their credit card information, providing a secure encrypted connection to the card-issuing financial institution.
Payment processors and payment gateways complement each other. Without the latter, it would be impractical to complete a financial transaction. It links your customers’ financial accounts to your merchant account. As a result, suitable payment processors have an in-house department to ensure the completion of a transaction. Alternatively, they use a third-party source that communicates with the credit card company to finalize the transaction.
Summing it up, for a successful transaction between your startup and customers, the following parties are involved in payment processing:
- The business
- The payment processor or a separate payment gateway if they aren’t combined.
- Clients’ bank or credit card organization.
- The business bank.
Checklist for choosing a payment processor for your startup
Selecting the ideal payment processor can significantly impact your startup’s bottom line and client management. A suitable payment processor should ensure the payment procedure is effective, secure, and hassle-free. Here are the other vital factors to help you evaluate and select a payment processor:
Convenience to your startup’s operations and clientele experience is an essential factor to consider. For example, a complicated checkout process dissuades customers, and it’s a straightforward way to lose clients, time, and money.
First and foremost, a payment processor that needs unnecessary personal information from your customers is a turnoff and will make them abandon their carts. In addition, as your startup expands, the eCommerce payment processor should be able to scale along effortlessly.
2. Overall costs
Consider the overall costs of the processing service and the time needed to set up the payment solution. Most payment processors charge a monthly fee for their service and a percentage of each transaction. Your business model, the type of payments you accept, and the amounts you receive on a monthly/annual basis will determine the pricing.
Also, you might be liable to handle chargeback fees, setup costs, PCI compliance fees, and cancellation costs. Therefore, it’s paramount to assess the overall costs associated with the potential service provider and ensure they won’t pile up and overwhelm your bottom line.
Companies that offer an interchange-plus pricing model tend to have a lower cost per transaction than payment processor firms deploying a flat-rate pricing model. Still, selecting a payment processor that offers the cheapest solution might be detrimental in the long haul. On the other hand, paying a little higher could be beneficial due to higher conversions, successful payments, fraud claims, and protection from fake online shoppers.
3. Integration with other software
The ability to export transactions to accounting software and other tools will go a long way in ensuring you don’t make errors in your books, lose money, and, significantly, facilitate tax compliance. Moreover, an ideal payment processor should integrate with the vast eCommerce platforms. Ideally, it shouldn’t get buggy with websites that customers prefer as their payment method.
4. Multiple features
Alongside integration with other digital tools, a payment processor should offer other features depending on your startup needs. For instance, the payment gateway should provide a global solution to accept broad credit cards, debit cards, and currencies if you venture across borders.
Payment gateways that offer multiple features such as electronic invoicing, text/email reminders for customers, smart chargeback management, etc., will streamline your operations and provide an enhanced clientele experience.
5. Fraud protection
The most critical aspect for any payment processor is the ability to offer automated security features. Fraudulent claims and security breaches are a significant impediment hindering the optimal success of eCommerce. As such, ensure the payment processor firm is PCI-DSS compliant.
Payment Card Industry Data Security Standard (PCI-DSS) refers to the rules that all companies offering payment processor services must adhere to. As a result, there is a guarantee of data security to safely store and manage financial data.
Therefore, ensure your prospective payment processor company offers fraud protection. Even better, they should provide point-to-point encryption and tokenization features that replace clients’ primary account numbers with tokens hackers can’t deploy.
6. Customer support
Finally, ensure the payment processor company has reliable and efficient customer service. It’s not uncommon for payment processors to have occasional downtimes. This is because of the thousands of dollars that go through their accounts every day. Nonetheless, a competent technical support team from the company that’s available round the clock can be helpful in such instances.
If you run into problems, there has to be an assurance that you can get in touch with your payment processor company by various means, and they will offer swift support to resolve any mishaps.
Selecting and integrating the ideal payment processor provider is crucial to making or breaking your business. For instance, a wrong approach could cost your business significant time and money and, worse, bring irrefutable damage to your reputation. On the other hand, a perfect payment processor will positively impact the customer experience and profitability/ Therefore, take your time to choose wisely by scrutinizing your needs, business model, and the above factors. Also, your startup can offer more than one payment gateway.