FOR ANY BUSINESS OWNER, PERHAPS THE MOST CONFUSING ASPECT OF THEIR BUSINESS IS DECIDING HOW TO ACCEPT CREDIT CARDS AND OTHER FORMS OF ELECTRONIC PAYMENT.
You’ve likely heard the term “Merchant Processor” before; these are organizations that provide equipment, services, and funding that allow your business to accept credit card payments. There are THOUSANDS of merchant processing sales organizations out there, and it can very difficult to differentiate or choose just one. Let’s talk about how to find one that suits the needs of your business.
What is a merchant processor?
A merchant processor is usually referred to as a credit card processor, or a merchant bank. They provide services to small and medium sized businesses. The processing banks certify and share risk with processors, also often referred to as “Independent Sales Organizations” (ISO), who each in-turn employ thousands of Sales Agents to act as “dealers” of their services. The largest number of processors are owned by First Data, or any of a number of other large credit card processing companies; e.g. Global, Worldpay, etc. Each processor offers slightly different services and pricing, so finding one that fits your business is important. It is also imperative to know the organization you’re working with has a direct connection to the processing bank.
Benefits of a merchant processor
First, think about how a merchant processor works and what they can do for your business. Some of the obvious benefits of using a merchant processor include:
• Flexibility – You can work with the merchant processor to ensure you have the required hardware, payment processing tools, and software to process credit card payments. The processor can set the overall program and help you implement it.
• Control – Since the merchant processor has your back and will do everything for you, you have more control over the final product. A merchant processor will oversee the entire program to make sure everything goes smoothly, including audit rights, approval processes, and timely funding.
• Transparency – With a good processor, you can know exactly what is going on with your program and pricing at all times.
Cons of a merchant processor
While many consider it a necessary evil, it is necessary to provide both credit card processing services and other electronic payment services (Apple Pay, Google Pay, etc.) to their customers. Here are some of the cons you may experience by choosing the wrong processor:
• Cost – With each of these various card and payment types there are inherent costs to the business owner. That can be a huge upfront cost for equipment, in addition to the ongoing costs associated with different payment types. The average small to mid-size business spends 3-4% of their credit card sales on fees associated with card issuers and processors, so it makes sense to use a processor that has good, reliable pricing.
• Limited Scope – Another consideration is location and type of business. Most processors don’t operate in as many markets as you may expect or may not provide services that cater to your risk profile or preferred payment method, so it’s a good idea to pick one that options to suit your current AND future business needs. Do they offer cloud reporting or full point-of-sale systems and online payment gateways?
• Long-term Contracts – Finally, many providers require binding, long-term contracts that leave business owners without the opportunity to make a change if they are dissatisfied with the service.
How to choose a merchant processor
Here are a few questions to ask yourself before hiring a merchant processor:
1. What payment options do you have for your business? You should look at the processors that are specialized for different types of businesses. For example, businesses that sell products at brick-and-mortar stores, or have a higher-than-average-risk profile (for example, non-federal contractors) would likely benefit from a processor that specializes in payments for retail vendors.
2. How much would you like your payments processed? I know, it seems like you’d like to be paid as soon as your customer actually pays for the product, but the reality is that some payment methods require a few extra days of processing time. Does your processor offer next-day funding?
3. Do you have to sign your life away on a 3-yr contract with a Liquid Damages clause or Early Termination Fee (ETF)?
4. Is the pricing reasonable; both upfront and ongoing? Is it consistent and transparent when you read your statements?
5. Is the customer service efficient, reliable, and friendly?
6.Lastly, is your business being provided the latest technology for your payment processing and reporting needs in order for you to compete in today’s market?
