Behind every successful business are gateway payment services. Payment processors ensure that transactions are carried out quickly and make the customer experience more manageable. Although a credit card transaction can seem simple, it is a more complicated process involving payment gateways, the customer’s bank, and the merchant’s account. All this communication happens in mere seconds.
What Are Payment Processing Services?
Payment processing services are services that collaborate with all parties involved with the payment process to make it simple for customers to make purchases. Businesses that take payment options such as credit or debit cards need a payment processor. They ensure that merchants receive their money from any transaction that doesn’t involve paper money. Payment processing services validate the customer’s information and send the funds to the merchant.
How Does Payment Processing Happen?
The payment processing happens through authorization, funding, and settling a purchase. When a customer purchases something from a merchant, the payment is made with a card. The merchant then sends a request to the payment processing systems for authorization of the purchase, and the payment processing systems complete the following steps:
- The payment gateway service submits the purchase to the issuing bank associated with the customer’s card.
- The issuing bank accepts or rejects the purchase.
- The issuing bank sends an approval or rejection status to the merchant and their bank.
After the authorization process is completed, the process of settling the funding begins. This occurs when the purchase is sent to the merchant’s bank account. The merchant sends authorization requests to the online payment processing services, which then send the details to the card issuer. The card issuer is connected to the issuing bank, receives details of the purchase, and carries out the process further with the following steps:
- The issuing bank charges the sum of the purchase to the cardholder.
- The issuing bank sends the amount to the merchant bank minus any interchange fee.
- The merchant bank sends the purchase amount to the merchant account.
The Costs Involved In Card Purchases
It costs money to operate networks in which cash flows. Companies that do this type of work, including payment processing services, charge merchants for using their services. The fees of each purchase are collected from the merchant, and the payment processing service takes a cut of the money. The cost is typically 2 or 3 percent of the purchase and includes fees such as:
- Interchange fees: Interchange fees make up about three-fourths of the total costs during a transaction. Card networks set this rate, and it typically is sent to the card issuing bank.
- Assessment fee: An assessment fee is paid to a card network such as Visa or Discover. The amount is a percentage of the gross sales for the month.
- Processor fees: Processor fees go straight to the payment processing services.
How To Choose The Best Online Payment Processing Services
For any business that accepts debit cards or credit cards, online payment services are a vital part of the process because they need to receive money that doesn’t come from paper currency. When choosing online payment processing services, keep in mind these essentials:
- Excellent customer service
- Flexibility with purchases
- Tools to grow your business
- Fraud risk management
- Fast payments
- Excellent customer support
- Integration with systems
- International payment options
- Mobile payment support
Besides these factors, another thing to think about is the fact that not all payment processing systems process all types of purchases. Some can process online payments, and some might specialize in in-store purchases. Ensure that your payment processor accepts all forms of payments that your business needs.
What Types Of Payments Do Payment Gateway Services Process?
With online payment processing services, you can accept a variety of payments, including:
- Credit Or Debit Cards: Credit and debit cards are the most common forms of payment among customers. In a card transaction, the buyer provides the card details, which are then transferred to the payment processor.
- E-Wallet: E-wallets are another form of payment that can be accepted. Customers sign up for the e-wallet with their bank account or credit card. Paypal and Apple Pay are considered e-wallets.
- Bank Transfer: Bank transfer is another payment option that gives the customer complete control over the purchase because they have to authorize the purchase themselves.
The Benefits Of Using A Payment Gateway Service
There are several benefits to using a payment gateway service, including:
- Several Payment Options: Payment gateway services give businesses an easy way to accept credit and debit cards as payment. Providing these convenient payment methods can enhance customer experience and increase customer loyalty because they want to pay for your product or service in a way that is convenient for them. Customers can also use E-wallets and other types of payment services to bring convenience to the customer.
- Security: Due to the fact that online payments transfer a lot of sensitive information, it is essential that the process is secure. Without protection, the customer may not feel comfortable sharing their information, which can lead to a loss of business and trust. Payment processing services provide quality security to ensure the safety of the customer’s data.
- Flexible: Using a payment gateway can allow you to scale your business effectively. As payment options rapidly change, it’s essential for your business to have the flexibility to grow. Online payment processing services have the latest services in online payment for your business to grow and transform as necessary.
- Payment Systems Integration: Businesses use many systems to smoothly operate their services. It is crucial that these systems properly integrate with the payment processing services so that the business can continue to run smoothly.
- Analytics: Working with payment processing services offers the business the ability to access a large amount of data. Payment processors also provide quality analytics tools to analyze data and determine trends. These analytics are beneficial for innovation, planning, and controlling.
- Save Time: Online payment processing services save the merchant time by being able to take payments in seconds. Regardless of where you are doing business worldwide, you can collect payments easily and quickly.
- International Payments: Payment processing services give the business the ability to accept worldwide payments in multiple currencies using multiple methods so you can grow your business simply.
- Providing An Enhanced Customer Experience: A payment gateway service can offer a wider variety of payment options to prevent shopping cart abandonment and improve customer experience.
- Reduce Declined Purchases: Declined purchases can be a headache for a business that can produce additional costs. However, with a payment gateway service, they check the fund availability right as the sale occurs to either approve or decline the transaction to prevent these charges.
- Fraud Detection: Payment processing systems protect the customer’s information and deal with chargebacks. They also prevent fraud by using PCI-DSS compliance and data encryption.
- Fast Cash Flow: Most online payment processing services credit the merchant account within 2 to 3 days of purchase, so you don’t have to wait so long before getting the cash for a purchase.
- Automation: Online payment processing services reduce the need for humans in the payment process. It also minimizes human error. The payment processor allows you to set up automatic withdrawals and recurring payouts for bills.
- Excellent Support: The best gateway payment services provide reliable support. If you ever have a problem with a purchase, you can contact them immediately for help. Excellent customer support can help you with setting up your account, providing business advice, and resolving any disputes with purchases.
Payment processing services are a crucial part of doing business, primarily if the company collects non-paper transactions. Gateway payment services allow customers to share their information when making purchases securely. They also provide convenience for the merchant and the customer to make payments in seconds.
Selecting the right payment gateway service can automate the process of taking payments, increase your cash flow, save you time, prevent fraud, and enhance the customer experience.
How do payment processing companies make money? ›
A dollar amount for every transaction processed: The payment processor (who might also be your merchant bank) makes money by charging a fee, called an authorization fee, every time you process a transaction (whether it's a sale, a decline, or a return—no matter).Is payment processing a good industry? ›
The payment processing industry is big business. The amount that people spend using credit cards in North America is over $3 trillion per year and that is growing by about 8% per year. Payment processing fees add up to around $85 billion per year. It's easy to understand why the payments industry is so competitive.What are the benefits of merchant services? ›
A reliable merchant processing service gives you the ability to provide invoicing, receive credit, debit, and eCheck payments online, set up recurring billing, and take your business with you wherever you go.What do payment processing companies do? ›
Payment processors are companies that process credit and debit card transactions. Payment processors connect merchants, merchant banks, card networks and others to make card payments possible.Why is payment processing important? ›
Payment processing service providers assist merchants and customers in carrying out a smooth transaction. They mediate between the customers, merchants, card association, and the issuing bank, which makes them an important part of the financial industry.Why are payment processors needed? ›
It's a type of software that handles the technical side of transferring cardholder information. If you don't have a payment gateway, then you won't be able to receive payment from your customers, even if all the other elements are in place.What is exciting about the payment industry? ›
The payments industry is growing, in size, in value and in diversity. Companies from adjacent sectors such as gaming, digital services, retail and telecommunications are all entering the payments space, recognising the future potential of the industry.What are the benefits of using a payment service to purchase products? ›
- Instant Payment. Electronic payments are much faster than the traditional methods of payments such as cash or cheques. ...
- Higher payment security. ...
- Better customer convenience. ...
- Saves processing costs. ...
- Low risk of theft. ...
- Transparent. ...
- Security. Since payments involve actual money, payment systems will be a prime target for criminals. ...
- Reliability. ...
- Scalability. ...
- Anonymity. ...
- Acceptability. ...
- Customer base. ...
- Flexibility. ...
Overall, payment gateways simplify the online payment process for your business and help you receive payments faster, more conveniently, and with better security. If you are considering receiving online payments, or want to enhance the method you are already using, then a payment gateway is what you're looking for.
Why is merchant service important for business? ›
It gives your business the flexibility you need to handle multiple avenues of payments without having to collaborate with separate processors. Another priceless benefit of a modern merchant service solution is how it translates into less work for you in terms of data consolidation.What is a good effective rate for merchant services? ›
Effective rates for most merchants should average between 1.70% and 2.1%; depending upon your average ticket, card mix, and monthly volume. If your effective rate exceeds 2% ( or . 02 based on the calculation above) you are likely paying too much!Who benefits from transaction processing system? ›
A TPS allows for the user/customer to have a level of reliability and confidence during transactions. TPS is swift and cost-effective. The use of TPS in businesses minimizes the occurrence of error during data transactions. The TPS is designed to be user friendly.How can I improve my payment processing? ›
- Look Beyond Credit Cards. Payment systems aren't just about taking credit and debit cards. ...
- Manage Customer Data. ...
- Understand and Reduce Fraud. ...
- Keep Your System Updated. ...
- Work With the Right Partner.
- Best Overall for Small Businesses: Square.
- Lowest Card Processing Rates: Payment Depot.
- Best for Online and In-App Payments: Stripe.
- Best for Fast-Growing Businesses: Helcim.
- Best for High-Volume Sellers: Stax.
- Best Low-Volume Rates: National Processing.
2022 is set to be another year of change in the world of payments, with three key trends: embedded finance, the Metaverse and crypto, likely to shape how we all view payments.How can a payment system improve the customer experience? ›
- Offer the Payment Methods Your Customers Want.
- Reduce the Number of Steps in the Payment Process.
- Create a Mobile-Friendly Payment Experience.
- Simplify Recurring Payments.
- Show Customers That You Prioritize Security.
The most common hard skill for a payment processor is customer service. 14.8% payment processors have this skill on their resume. The second most common hard skill for a payment processor is patients appearing on 10.2% of resumes. The third most common is data entry on 9.7% of resumes.What are two advantages of online payment services? ›
- Instant Payment. Online payments are faster than traditional payment methods such as cash or cheque. ...
- Higher Security. There are multiple measures to make online payments more secure, such as tokenisation, encryption, SSL, etc. ...
- Convenience. ...
- Saves Processing Costs. ...
The benefits of a payment plan are: It is an economical way to meet payment deadline requirements for registration. Multiple plans are offered to meet specific needs of different student populations (e.g., undergraduate, graduate, financial aid recipients, etc.)
What are the six attributes of payment systems? ›
This theme is built on the six attributes of safe, secure, fast, convenient, accessible and affordable payment systems identified in the previous vision.Which payment system is best and why? ›
- Stripe: Best overall payment gateway.
- Adyen: Best omnichannel option.
- Helcim: Best interchange plus pricing for businesses of all sizes.
- PayPal: Best for doing everything in one place.
- Square: Best if you also have a storefront.
- Braintree: Best to accept a variety of payment types.
Here is a list of our partners and here's how we make money. Credit card processing fees will typically cost a business 1.5% to 3.5% of each transaction's total. For a sale of $100, that means you could pay $1.50 to $3.50 in credit card fees.How much money do payment processors make? ›
While ZipRecruiter is seeing annual salaries as high as $52,000 and as low as $13,500, the majority of Payment Processor salaries currently range between $30,000 (25th percentile) to $38,000 (75th percentile) with top earners (90th percentile) making $47,000 annually across the United States.Why do payment processors charge fees? ›
Factors that Affect Payment Processing Fees
The purpose of the interchange fee is to help the issuing bank cover handling costs and the risk of approving the sale, as well as any fraudulent transactions that may occur. The interchange fees are set by each network, and they vary depending on the issuer.
Salary Ranges for Payment Processors
The salaries of Payment Processors in the US range from $19,064 to $62,055 , with a median salary of $46,920 .