Accepting credit cards and other forms of digital payments is a must for small businesses and entrepreneurs today as consumers increasingly opt for quick and convenient payment methods. A report by the Federal Reserve Bank of San Francisco found that consumers use cash for only 20% of payments. Today, accepting cashless forms of payment is a business imperative for catering to customer preferences and remaining competitive. That requires small businesses to select a best-fit payment processor to help drive business success.
A payment processor is a third-party company that takes care of managing all the logistics of the cashless payment transaction process. These companies essentially function as intermediaries between a business and a credit or debit card network for payment processing.
While selecting a payment processing company may sound simple, this task becomes more daunting for small businesses considering the massive number of payment processing providers in the market vying for their business. The payment processing solutions market size valued at $44.41 billion in 2021 is projected to reach $97.26 billion by 2030, growing at a compound annual growth rate (CAGR) of 9.1% from 2023 to 2030, according to Verified Market Research. The entry of fintechs into the payment processing space is one of the factors fueling the growth of this market and giving small businesses even more options for payment processing.
The wealth of choice when it comes to payment processing companies and the wave of fintech entrants in the market offering innovative new solutions is enough to make a business owner’s head spin. This will sometimes cause a business to just stay the course, and not entertain new payment processing solutions, which is a huge mistake! There are new programs and technology solutions in the industry that can increase profitability and efficiencies within your business. So, to take the complexity out of selecting a payment processing company, here are five key things small businesses and entrepreneurs should know about payment processing:
Payment processing can be simple
One of the major complaints about payment processing companies is the complexity of fees which often result in the unpleasant surprise of higher-than-expected bills at the end of the month. Hidden fees, lengthy contracts and high equipment costs unnecessarily complicate payment processing for small businesses and eat into the bottom line.
Fintech companies moving into the payment processing space are using technology to simplify and improve payment processing. For example, technology is being used to help small businesses alleviate processing fees through a Cash Discount program. When a customer pays with a card, proprietary technology automatically isolates the processing fee included in the price and applies it to the merchant’s processing cost. When a customer pays with cash, the technology recognizes that no fees are incurred and issues a small discount to the customer. The technology helps business owners build the cost of accepting cards into their pricing, allowing them to maintain the same profit margin on every sale regardless of payment type.
Transparency that breeds trust is essential
Many credit card processing companies are not known for their transparency. Undisclosed fees, locking business owners up in long-term and expensive equipment leases, advertising low rates and hiding high fees in the fine print are just some of the ways transparency is undermined in the industry. This lack of transparency breeds mistrust and is a major source of frustration for small business owners who just want to focus on the business of doing business and not on working to understand credit card processing.
Small business owners and entrepreneurs selecting a payment processing partner should look for companies that are transparent. Meaning companies that provide business owners with the information they need to fully understand what they are paying for. Payment processing companies that have transparency embedded in their DNA don’t list any misleading rate quotes or tout unrealistic guarantees. Instead, they build trust by clearly educating business owners and disclosing rates for all business types to make pricing as transparent as it can get.
Flexibility is a must
Small business owners typically have goals to scale their businesses and their payment processor should have the capability to scale with them. That means the right technology tailored to fit their needs and no long-term contracts that keep them locked into a solution that might not be working for them anymore. It is imperative to work with a processor that sees itself as a partner and not just a vendor.
Security and support are critical
Every business today needs to protect its data and customer information from bad actors. With credit card fraud an unfortunate reality, it is critical for small businesses to select a secure payment processor. Choose a processor that stays up to date with PCI (payment card industry) and DSS (data security standard) compliance. This can help protect the business from any liability and avoid security issues that can result in loss of customers, reputational damage and regulatory fines.
Whether a small business is a florist operating 9 to 5 or a bar that stays open until 2 a.m., 24/7 support for transaction issues is critical. That support should go beyond virtual interactions with a less-than-helpful chatbot. The best payment processing companies provide direct help from in-house technical support staff who answer calls promptly.
A partner that caters to small businesses is the best fit
Small businesses and entrepreneurs should seek out a provider with experience in servicing small businesses. The best fit payment processor for small businesses is a company that caters specifically to this sector. Payment processors that specialize in servicing small businesses have a better understanding of their needs and challenges and have the expertise to develop solutions tailored to meet their unique payment processing requirements.
The right payment processors should have multiple programs and technology solutions to ensure they are building a solution that meets each business’s needs. The one size fits all era of payment processing is of the past, and payment processors should be following suit.
Armed with the information above, small businesses can partner with a payment processor that allows them to accept a range of credit cards and digital payments to take the friction out of payments for customers. Some of the benefits accruing from this include more customers, more sales and more loyalty.
Jesse James is Director of Strategic Partnerships and Solutions at VizyPay. He is 15-year veteran of sales, sales leadership, and entrepreneurship. Jesse is a leadership enthusiast and has 17 years of sports coaching experience. He was previously Director, Recruitment Services at DHI Group, Inc and Chief Revenue Officer at FiQore Technologies, Inc.