Did you know that nearly 20% of businesses fail within the first two years? The good news, however, is that there are steps you can take to prevent this from happening. The good news is that running an online business allows you to avoid many of the overhead costs that you would typically encounter.
However, there are certain nuances you need to prioritize when it comes to operating successfully. Payment processing is one of the most important, and it’s essential that you fully understand it.
We’ve put together a quick guide that has everything you need to know about payment processing software. Let’s get started.
So What Exactly Is Payment Processing?
Put simply, it’s the process of collecting and managing payments from customers. This can be done through a variety of methods, but the most common is credit card payments. There are a few different ways to process credit card payments, but the two most popular are through a merchant account or a payment gateway.
A merchant account is a type of bank account that allows businesses to accept credit card payments. In order to set up a merchant account, you’ll need to partner with a bank or other financial institution. Once you have a merchant account, you can start accepting credit card payments from customers.
A payment gateway is a third-party service that helps businesses process credit card payments.
Payment gateways typically work with merchant accounts to help businesses accept credit card payments. If you don’t have a merchant account, you can still use a payment gateway to process credit card payments.
What Are the Steps in Payment Processing?
There are four main steps in payment processing:
- Authorization: During the authorization stage, the customer’s credit card information is transmitted to the merchant.
- Capture: If the customer has enough funds to cover the purchase, the merchant captures the funds and the transaction is complete.
- Settlement: After the transaction is resolved, the merchant sends the captured funds to their bank.
- Funding: Once the funds have been deposited into the merchant’s account, the customer has officially paid for their purchase.
After this process is complete, the customer will receive a receipt for their purchase.
What Are the Benefits of Payment Processing?
There are a few key benefits that come with payment processing. These include increased sales, boosted security, and improved customer satisfaction.
It’s crucial to keep these in mind, as they can help you make the case for why your business needs payment processing capabilities. Let’s take a closer look at the below.
Increased Sales
One of the biggest benefits of online payments is that they can help you increase sales. When customers know that they can pay with credit cards, they’re more likely to make a purchase.
The more payment options you offer, the higher you can expect your sales numbers to be.
Increased Security
Payment processing can also help boost security for your business. When you process payments through a merchant account or payment gateway, the customer’s credit card information is encrypted.
This helps to protect against fraud and data breaches.
Improved Customer Satisfaction
Another benefit of payment processing is that it can improve customer satisfaction.
Customers appreciate being able to pay with their preferred method, whether it’s credit cards, debit cards, or even PayPal. This can help create a positive customer experience and lead to repeat business.
How Do I Get Started?
One of the easiest ways is to use a payment processor that offers a pay-as-you-go model. You’ll only pay for the credit card payments that you process, and you won’t have to worry about setting up a merchant account or payment gateway. This can be a great option if you’re just getting started and aren’t sure how much credit card volume you’ll be processing.
Another option is to use a payment processor that offers a subscription-based model. With this type of service, you’ll pay a monthly fee for access to a payment gateway and merchant account. This can be a good option if you’re expecting to process a high volume of credit card payments each month.
Finally, you can set up your own merchant account and payment gateway. This will require a bit more work on your part, but it can be the most cost-effective option in the long run.
If you’re processing a high volume of credit card payments, this may be the best option for you. Some merchants are priority targets for hackers. These businesses will need to integrate high-risk merchant payment processing.
What Should I Look for in a Payment Processor?
There are a few different things you’ll want to keep in mind when you’re looking for a payment processor.
It’s crucial to make sure that the processor offers a payment gateway and merchant account. You’ll also want to make sure that the processor can handle the volume of credit card payments that you’re expecting to process. The processor that you use should offer competitive pricing.
Of course, you should also take their reputation into consideration.
Make sure to read online reviews and compare the features that each processor offers. This will provide valuable insight into what you can expect from working with them.
Payment Processing Is Easier Than It Seems
Although it may seem complex at first, payment processing is actually quite simple. By following the above steps, you can get started with taking online payments and boosting customer satisfaction.
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