Starting a New Business? Choose the Right Payment Processor

You just launched your new business.  Congratulations!  Now what?

If you accept any type of payment card, one of the most important decisions you need to make is selecting a payment processor.  But which one is best for your business?  How do you choose the right one?  Making the wrong choice can be costly, so picking a payment processor that works the best for both you and your customers will save you time, money, and headaches.

Here are three important things to consider when selecting a payment processor


Pricing and Fees
While some things in life are free, like air and sunshine, payment processing has costs.  Most payment processors charge merchants an initial setup fee, plus a combination of monthly fees and transaction fees.  Monthly fees vary from processor to processor, depending on how the contract terms in the service agreement are set up.  While interchange fees are fixed across processors, usually ranging between 1% to 3% per transaction, Mastercard and Visa also charge card network brand fees calculated as a percentage of the transaction.


Why It Matters
Starting a new business can be expensive, but there are some things you can do to control how much your business spends on processing costs.  When comparing the costs from different payment processors, consider these questions.


What is the processor’s pricing model?
Payment processors offer several pricing models:

  • Flat rate – A flat rate based on a fixed percentage of all transaction volumes; plus, a per transaction fee.
  • Interchange plus pricing – A fixed rate charged in addition to the interchange.
  • Tiered – A rate based on one of three transaction categories: Qualified (lowest rate), mid-qualified, and non-qualified (highest rate)


How do the payment methods and card types my business accepts affect interchange fees?
The average interchange rate is about 2% of each transaction, but several factors affect the actual percentage merchants end up paying.

  • Transaction type – card present transactions (like on a terminal) have lower rates than card-not-present (CNP) transactions (like online and mail order purchases) because the customer’s card is physically presented to a payment device, making the transaction less likely to be fraudulent.
  • Industry or business – The size of a transaction / or type of industry also affect interchange rates.  Large companies can more easily negotiate better rates with processors. How a business is classified, based on their merchant category code (MCC) will also affect their interchange rate.
  • Card type and card brand – Some cards are more expensive to process than others.  Interchange fees are higher for premium credit cards, but are lower for PIN debit cards.  Cards issued by banks that offer high rewards also have higher interchange rates.
  • Tokenization and security controls – The more secure the data submitted with the transaction, the lower the rate.  For example, starting in October 2021, Visa lowered interchange rates to merchants who implement the Visa “smart-payment token” to encrypt card data.

The costs associated with processing card transactions— such as which pricing model you choose and factors that affect interchange rates— can add up quickly, so make sure the payment processor you choose can tailor a program that offers you the best rates based on your sales and transaction volume.


Support for Multiple Payment Options
Although many customers still prefer to pay with cash or a paper check, a recent survey by the Federal Reserve Bank of Atlanta, GA, reported that online purchases increased from 12% in 2019 to 15% in 2020.  The survey also reported that the percentage of consumers who used at least one payment app, such as Venmo, went up from 54% in 2019 to 62% in 2020; in addition, 46% of consumers made at least one mobile payment in the 12 months ending in October 2020, up from 38% at the end of October 2019.


Why It Matters
Customers today expect an easy, hassle-free buying experience, whether their purchases are made in-store, or online., or with a smartphone.  To meet customer expectations, merchants must not only accept traditional payment methods, but be willing to embrace new payment technologies as well.

Here’s a list of the payment methods most preferred by shoppers in Canada and the United States.

  • Credit Card
  • Debit Card
  • Digital Wallet (eWallet)
  • ACH (eCheck)
  • Cash and Check

Paying with a credit card is fast, more convenient than carrying cash or checks, and may allow customers to accumulate rewards.  Payment methods such as digital wallets and peer-to-peer (P2P) apps are becoming increasingly popular, especially with younger demographics.  Choosing a payment processor that supports multiple payment options can help you increase sales and improve customer satisfaction.


24 X 7 Customer Service
What’s worse than calling the help desk only to be put on hold for 20 minutes (and having to listen to that horrible music)?  Or sending in a support ticket via email and waiting three days for a response?  When you finally do get an answer, does the technician or account representative have the information you need?


Why It Matters
If your processor’s system malfunctions during business hours, you risk losing sales, so the faster you can engage your processor’s technical support team, the sooner you can get back to doing business.  But some payment processors limit their support service to only one or two options, making it difficult for merchants to get the help they need in a timely manner.  The best payment processors will provide the following types of customer support services.

  • Live support via toll-free phone number during business hours
  • After-hours phone support, including weekends and holidays
  • Dedicated email inbox
  • Self-service website for submitting support tickets
  • Direct dial phone numbers for account representatives

An unresponsive customer service department is no customer service at all, so make sure that the payment processor you choose offers robust customer support as part of your service agreement.

You have spent all that time planning your new business; it is finally time to launch and start serving your customers.  Payments is the crucial link between your dreams and the reality of running your business, start off right with the right team at your side making sure your payments are collected and protected in the best possible manner.

Three factors must come together to make payments easy: the right technology/solutions, exceptional customer service 7/24 and of course, fair and transparent pricing.
For all this and more, please join us at Cartis Payments.