May 23, 2019
By Saleem Khatri, CEO of Lavu
When shopping around for a payment processor, take a look at your business and your customers. What payment system would benefit them best? What system would benefit you best? Answering these questions will set yourself on the right path toward choosing the right payment processor. After all, there's a lot to consider when it comes to the payment experience.
Of course, your research doesn't end there. Let's define some terms you should know before embarking on your payment processor shopping journey:
Payment processor: A company used by a merchant that handles transactions from a variety of channels, such as credit and debit cards.
EMV technology: A secure payment method that stores data on integrated circuits in addition to magnetic stripes on cards.
PCI compliance: The security standard for organizations that handle branded credit cards.
Merchant account: A type of bank account that allows businesses to accept payments, usually from credit or debit cards.
Now that you're familiar with these terms, this quick guide will serve as a starting point for you to begin your payment processor selection process. In this article, we'll cover the basics, the numbers, and payment processors in action.
Are you ready to take a closer look at how to select the right payment processor? Let's get started!
Payment processors: The basics
There are many ways to accept payments, such as:
Credit/debit cards
Contactless pay (like Apple or Samsung Pay)
Bank/ACH payments
Cash
Check
When selecting your payment processor, determine what types of payments you want to accept, keeping in mind that the more payment types you accept, the more customers you'll be able to accomodate.
Your POS system should also integrate with your payment processor. This is essential because when both systems are integrated, you can more easily keep track of payments and reports.
For instance, if you're running a restaurant, having a robust POS system like Lavu's will help you keep track of each table's payment status and process payments simultaneously.
Payment processors: The numbers
So, how much does payment processing cost?
You might be tempted to go for smaller upfront fees, though this may not always be the right choice for your business. A larger investment in a more efficient payment processor can actually save you money in other areas of your business.
Let's examine the pricing you'll encounter. There are two types of fees that are incorporated into your pricing plan:
Wholesale fees, which go to the credit card-issuing banks and the credit card associations. These are fixed amounts and non-negotiable.
Markup merchant account fees, which go to your credit card processor, as well as other equipment or software providers. These are negotiable fees, however.
Next, there are pricing models for payment processors, which include:
Scalable, which follows a tiered nature. Your rates adjust as your business grows, so this tiered pricing makes it more affordable to stay with your system.
Interchange-plus, which is the most transparent plan and itemizes all wholesale fees and markup merchant account fees on your monthly statement.
Flat-rate, which is also transparent and applied as a flat monthly fee and per-transaction fee (sometimes offered without a transaction fee). However, it's meant to be simple, rather than competitive.
Determine which is right for your business. To return to the restaurant example, if you're starting out as a small cafe and anticipate growing, a scalable plan may be the ideal option for you.
This all comes back to your POS system. It's important that you invest in the right POS software, namely one that works directly with your payment processor, as the upfront investment will help you save costs in the long-run as a direct result of greater efficiency.
If you're looking for more information on payment processor basics, check out this helpful guide.
Payment processors in action
Choosing the right payment processor can seem daunting, but if you find the appropriate pricing plan and features, you'll set your business up for success.
Efficient payment processors make the entire payment experience convenient, secure, and easy. Let's explore these in more detail.
Convenience
As touched on earlier, accepting a variety of payment types (including contactless payments in many cases) is important because it makes the payment process more convenient for your customers. It can also increase your revenue as a result of appealing to more customers.
For instance, in your restaurant, it's important to highlight self-service kiosks or mobile options to customers if you have them. This can impact their experience in your restaurant, especially if there are long lines and self-ordering kiosks and other payment options are available.
Security
Make sure that the sensitive information you're receiving (credit card numbers, etc.) is secure. With EMV chip cards, fraud has been prevented on a higher scale in recent years. PCI compliance is also mandatory for all businesses that accept credit cards, so be sure to purchase a payment processor that is compliant with PCI payment system requirements, and continue monitoring your activity even after you've become PCI compliant.
Ease of Use
As we've touched on already, look for an all-in-one POS system and payment processor. If you don't need to buy separate systems, it'll be even more convenient for you to keep your data in one place. This will also leave less room for error.
The easier your system is to use, the easier it will be to train your staff to use it, as well, which will in turn lead to happier and satisfied customers. To return to the cafe example, when you're in the middle of your first restaurant accounting process, it'll be easier to track your numbers and payments, too.
Payment processors can make running your business easier. But it's up to you to make the right investment and select the one that will best suit your needs and make your customers happy.
Do the necessary research, and you'll be on your way to collecting payments in the most streamlined and secure way possible!
Cover photo: Lavu
Topics: Mobile Payments, POS, Restaurants
Companies: Lavu
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