Payment Processing Basics for Entrepreneurs
Payment Processing Need-to Knows for Entrepreneurs
Starting a new company is tough; entrepreneurs need to determine the market for their product or service, how to market it, and who to hire. Those three items are only scratching the surface of what entrepreneurs’ responsibilities are. Today I will go over what entrepreneurs need to know about accepting payments for their company to save them time and money.
Payment Processing Basics
An entrepreneur needs to determine what kind of payments they need to accept for their company to be successful. These types of payments could include:
• Credit Cards
• ACH Checks
• Wire Transfers
• Online Payments
• Recurring Payments
Once an entrepreneur determines what payments they will need to accept they can begin to evaluate payment processors to find the best option.
Types of Payment Processor Relationships
There are many different ways that entrepreneurs can accept payments, but no matter what option they choose they will need to partner with a third-party. Below are the different types of payment processors:
• Payment Processors: Companies such as Elavon, Worldpay, TSYS and First Data, that offer credit card processing to merchants accepting payments in-person, over the phone, and online. While these are large companies that are offering what entrepreneurs need, they are often not the best option for start-up companies because they will only offer basic processing services, likely charge higher rates, and will not offer a high level of customer service. These companies are also used by Independent Sales Organizations (ISO’s) to offer their clients processing services.
• Payment Facilitators: Companies such as Stripe, Square and PayPal. Payment facilitators set up a master Merchant Account relationship with the bank and then enroll all of their sub-merchants through that relationship. This leads to companies using Payment facilitators having less control over their program as Payment Facilitators can cancel accounts at any time. For example, if your start-up has a few chargebacks, entrepreneurs could see their accounts cancelled, leaving them with no alternative to collect revenue. Payment facilitators are a good short-term solution for start-ups to begin collecting revenue, but ultimately as businesses begin transacting more revenue, they will be better served seeking out a traditional, direct payment processor relationship.
• Independent Sales Organizations: Premier Payments Online is an independent sales organization, or ISO. This means we are independent of all payment processors and have many relationships with different banks and processors. This allows us to find the best processor for a company’s needs while adding on any additional financial or fraud prevention and risk management software required, to allow businesses to complete their transactions in the most efficient way possible and maximize revenue potential. ISO’s are able to offer individualized customer support while designing a bespoke payment processing option that is the most cost effective and will save entrepreneurs valuable time that they can spend elsewhere improving their business.
Whether you are considering starting a company, are in the infancy stages of a start-up or have been running a company for years make sure you are evaluating your payment processing solution to see if it truly works for you. While cost is the main evaluation point for most businesses, there are many other things to consider such as the ease of use to process payments, the visibility of the important financial metrics for your business, having software to keep your customer data safe and offer recurring billing.
If you are interested in an independent assessment of your current payment processing solution, please contact us. We will provide a pro forma to show what your current costs are, and what they should be based on your class of business and volume of transactions processed.