What does a start-up need to know about payments and payment processing? Jerry McCarley, CTO, Markaaz explains
Selecting a suitable payment processor can be challenging for a start-up. However, it is one of the most essential steps to setting up a successful small business, whether you are taking online payments or using a point-of-sale system.
Choosing the right vendor for payment processing is the key to a successful business. No small business owner wants the payment process to become challenging or too arduous for their clients resulting in abandoned carts and incomplete payments.
We have all heard of the big payment processors, such as Stripe, PayPal, and First Data, but how do you choose the right one for your business? Let’s dive into what a payment processor is and what they do for your business.
What is a payment processor?
A payment processor is a technology that enables your small business to take payments safely and securely for goods and services for your small business. The types of payments these processors handle for your small business include debit cards, credit cards, and direct bank account payments.
Your payment processing software is linked to your business bank account and can transfer your income into your account. Each payment processor charges fees per transaction and fees to transfer your settled funds into your designated bank account.
Throughout the transaction, a range of fraud checks occurs – including the most basic; checking the credit card’s issuing country and the location used to judge the veracity of the payment.
If you have ever wondered why you should tell your bank when traveling overseas, this is why. No one wants a blocked credit card on vacation or business travel.
If anything about the payment concerns the software algorithm, or if the person does not have enough funds or the card is not active or expired, the payment is declined.
This verification process takes seconds and is not nearly as cumbersome as it sounds!
As you can tell, having the right payment processor is essential to a successful business.
How do I find the right payment processor?
Finding a suitable payment processor is essential when you begin your business. Don’t be shy about setting up meetings with your top contenders and asking to negotiate your terms.
“Some processors are willing to negotiate, and others are not willing to negotiate on the exchange rate markup. It really, in part, depends on your sales volumes. The higher your volume, the better deal you can make,” explains Jerry McCarley, Chief Technology Officer at Markaaz.
When negotiating with a payment processor as a small business, you will want to bring your sales volumes to the table. The payment processor will want to know how many transactions you have, your average transaction size, and more to decide your rate and risk.
As a small business, you must compare processors to see the best rates and check their miscellaneous charges.
“What does the processor charge for chargeback processing or statement processing? Terminal leases? These things can really add up, so it’s important that you look at all the options and bring all your information to the table when you’re having that conversation,” notes McCarley.
Markaaz’s top tips for finding the right payment processor
- Know what your monthly transaction counts and total dollars are.
- Know what your average transaction size is
- Compare processors for their best rates
- Look at those miscellaneous charge rates
- Look for the right terminal options or website integration options that match the type of business that you’re running
Why you need a verified payment processor
Electronic payments are highly susceptible to fraud and abuse, whether using a card at a terminal or receiving an online order payment. The liability for misuse of credit card data can expose you as a small business to huge financial losses. This is why it is highly recommended to use a well-known payment processing vendor for all your transactions rather than looking for the cheapest or DIY-ing your own.
Making your own payment processor, in general, only really makes sense when you have volumes that reach very high thresholds.
Developing your own payment processing software requires a lot of upfront time and a lot of upfront costs. Generally, if you’re a small business, you can get into this quicker by using a processing vendor versus trying to do your own thing. Your own thing really only makes sense when your volumes get high enough to justify it,” says McCarley. “You have got to get software licenses for various things. You’ve got to get connections to different networks arranged. There are a number of certification steps you must complete. It can be pretty expensive to go and do all of these things yourself. In general, the cost will be too high for the average small business to justify it.”
Payment security is an essential part of payments and payment processing. So, what should you, as a small business, look for in a payment processor to ensure their customers’ payments are kept secure? The answer is simple.
When you sign up with a payment processor, whether via an independent sales organization (ISO), such as our partners Paysafe, or directly with the payment processor themselves, you’re handing your payment security over to them to manage.
“You want to make sure whomever you’re selecting is PCI compliant, that they have a site audit that they’ve completed and that they’re willing to share this information with you so that you know it’s been done. Keep in mind that from the small business perspective, you do have PCI compliance regulations you must follow yourself. You can’t, for instance, write people’s credit card numbers down on pieces of paper and keep them around the office. So, there are things that you, as a small business, are still responsible for from a security perspective. However, generally speaking, a lot of that is handled by the payment processor,” McCarley explains.
Making the right choice
The right payment processor for your business can make for a great experience, or if you make the wrong selection or go with the cheapest offering, it can make for a terrible experience. You should always check references and ask about customer service for the inevitable things that will always come up after you’re already a customer.
“Can you call somebody and get somebody on the phone, or is customer service all handled via email to somebody you don’t really ever get to speak to – that knows nothing about your business? These things can matter depending on what kind of relationship you expect with that payment processor,” McCarley notes.
We here at Markaaz work very hard to ensure that we provide the right tools for small businesses to succeed, so we build the right partnerships with the right providers to ensure your business runs as smoothly as possible.
What does Jerry do at Markaaz?
Jerry McCarley is the Chief Technology Officer at Markaaz. His role is to ensure that the technology we put together will provide our small business members with the tools and assistance they’re looking for to help them succeed in their business ventures. He helps ensure that our small business community can integrate and interface with financial institutions, leasing companies, and other businesses that might help them with financing and much more.