Processing payments may be expensive and difficult, especially for small firms. Accepting credit cards and mobile payments is essentially necessary in today’s industry in order to compete. However, many small business owners aren’t even sure where to begin.
You might find out that your bank offers merchant services accounts by performing a quick Google search, or perhaps your buddy offered a solution that worked well for their flower stand. In the end, your small business is distinct and necessitates a bit more investigation.
It’s simple to choose a solution out of convenience without conducting your research because there is so much information to take in about the payment processing sector. This often entails lengthy contracts, exorbitant fees, and subpar customer service for many small business owners. Here are three strategies to help you acquire the ideal small company solution while avoiding some frequent mistakes.
Start with the fundamentals and be informed.
In the realm of payment processing, a lot is happening. For anyone, the lingo, parties involved, and complex percentages can seem intimidating. Before calling sales representatives, this summary of several essential words is an excellent place to start.
Businesses are able to accept credit cards thanks to a group of financial services known as merchant services. A merchant services account is required by any company that wants to accept payments other than cash.
Independent Sales Organization: This is an outside entity that banks have approved to manage merchant service accounts for companies. Although banks sometimes provide their own merchant services, ISOs frequently provide more individualised customer support, better rates, and more cutting-edge technology.
Card Association: These are governing bodies, not banks, and include VISA, MasterCard, Discover, and American Express. They are in charge of things like determining interchange rates, mediating disputes between banks that issue and those that acquire cards, and maintaining and enhancing their card networks.
Card associations levy a fee known as interchange in return for a business’s ability to accept their cards. Although this is the cheapest rate for accepting cards, there are a number of additional fees that banks and ISOs add on top of interchange because business owners seldom deal directly with card associations. It is significant to remember that, regardless of who you process with, every business owner pays interchange.
Opt for a pricing strategy that suits your needs.
Different processing companies impose varying fees on their merchants. Here is a comparison of the top three.
Markups: The idea behind a markup is the same whether it is a percentage or a flat rate: In addition to the exchange, you must pay a percentage. This implies that you pay your merchant services provider more money the more transactions you handle. Although this technique may work effectively for small-volume enterprises, as your organisation expands, your processing costs will increase.
Tiered Rate: Of the three options presented, tiered pricing has the potential to be the most expensive. Low qualified, mid-qualified, and qualified are the three tiers that the processing company will establish. Then, each of the tiers will be given a price, and some of the cards you process will fall into particular tiers. Due to the lack of regulation, companies frequently place the most popular cards in the most expensive tiers, which drives up the cost of processing.
For access to the direct cost of interchange, a monthly membership fee is required under this arrangement. The amount of processing has no bearing on the results, so to speak. You only have to pay for your membership and the direct expenses associated with the cards you are using that month. Imagine this system as Sam’s Club or Costco: You are funding access to the most affordable price. The savings can be substantial, even in the first month of processing on a subscription model.
Keep in mind: It’s not only about the cost.
Your bottom line matters, that much is obvious. However, you cannot afford to base your choice just on pricing when it comes to payments. There are numerous other variables that, if picked incorrectly, might significantly affect your small business. Before making a commitment, evaluate a payments provider’s services holistically and take into account the following.
Technology: Do you operate a physical store and an online shop? It’s unlikely that you want to be in charge of two distinct vendors for that. Know what you need and exactly what payment processing firms can offer before starting any sales interactions. Your sales data can provide a wealth of information on the state of your company and even provide useful operational insights (like staffing and inventory). No matter how many various payment methods you accept, being able to see them all in one spot can really help. Inquire about data analytics and reporting from your provider, then consider how crucial it is for your company.
Customer service: Making payments is crucial. Period. Your business could halt if something were to happen and your team was unable to receive payments for purchases. Even though you might not be able to prevent every crisis, you can choose who will stand by your side when one arises. Whether you have an emergency or simply need some assistance, partnering with a payment provider who provides in-house, dedicated support can make all the difference in the world.