Small businesses are gradually succeeding, and they are paying large amounts to payment processors to reach their dynamic goals. Did you know? USA businesses have paid a whopping $160.7 billion in processing fees in 2022 in order to accept over $10 trillion in payment through debit, prepaid, and even credit cards.
However, due to the consistent revolution of technologies, small organizations are bewildered to change their game for payment processing and provide convenience and far more flexible payment processing solutions.
In this blog, Unity Payments will discuss how payment processors work for small businesses and how to select the most credible and right merchant account services.
How Does Payment Processing Work for Small Businesses?
Payment processing is a term that refers to a method that facilitates transactions between customers and organizations. The payment process can be further broken down into three parts:
Commencement Of Transaction
When a customer completes their shopping, they move to the final stage of the checkout. In this stage, the individual decides to make a payment using a debit or credit card. Subsequently, the point of sale system captures their card details and accepts payments through business payment gateways or other card-accepting devices.
Authorization
The card credentials are sent to the payment processor, which sents the transaction details to the card-issuing bank for authorization. The bank monitors the payment and determines if the account has sufficient amount to process the transaction. If everything goes perfectly, the bank sends an authorization code to the payment processor in order to move the transaction to the final stage.
Settlement
After moving to the final stage, the payment processor is authorized to collect funds from the card-issuing bank and send them to the business’s account. Moreover, the business bank account is credited with the amount after being filtered with any fees associated with the transaction.
In order to sustain the transactional processes, merchant account services stringently adhere to PCI compliance and security during transactions.
Payment Processing Challenges for Small Businesses
In the world of advanced tech, payment systems are transforming as well and opening doors for flexible transactions. However, these changes have also imposed challenges for small businesses. Including:
High Cost
Despite generating low revenue, small businesses have to deal with high costs to sustain payment processing solutions. Transactional fees or monthly charges for payment gateway integration can seemingly mitigate the potentiality of receiving high profits.
Fraud & Security Risk
Small businesses are consistently victimized by fraudulent acts, and why is that? Small businesses with reduced income fail to invest in top-of-the-line security measures, and non-adherence to PCI compliance and security makes the business vulnerable to data breaches and fraud.
Chargeback & Disputes
Dealing with refunds is always nerve-wracking, especially for small businesses. Chargeback or disputes is a term that enables customers to request a refund directly from a bank in case of an unsatisfactory product or service. Chargebacks can also be time-consuming and simultaneously costly for small businesses. In addition, chargeback processes also involve paperwork and consistent communication with merchant banks and customers. However, these processes often result in the loss of revenue.
Newer Payment Processing Solutions That Promises Convenience
Despite generating lower revenue due to the smaller numbers of prospects, small businesses must advance their techniques and allow customers to pay through multiple payment methods.
Multiple payment methods not only enable convenience but allow smaller organizations to target a wide range of customers who prefer different payment options. One of the most innovative payment options is discussed below:
BNPL
As stated by Frank Pagano in pcmag’s blog, “today’s consumer is all about convenience, “and BNPL (Buy Now Pay Later) is one of the bespoke payment trends that leads the charge. This advanced payment option allows users to purchase something immediately and enjoy the convenience of paying the amount in smaller installments.
Contactless Payment
Contactless payments were popularized during the COVID-19 pandemic. This payment method was tailored to facilitate customers to continue their purchases without touching a payment terminal. This significant advancement enabled businesses to follow COVID-19 safety policies imposed by the state government.
Contactless payment later became one of the effective payment processing solutions and ensured customers received a taste of convenience.
Digital Wallets
Digital wallets like Samsung Pay, Google Pay, etc, are consistently becoming the most preferred choice for online and brick-and-mortar stores. Almost 48% of consumers have started to utilize digital wallets as payments and are projected to grow more. Getting in touch with dynamic merchant account consulting will allow you to identify effective merchant service providers that provide digital wallet facilities at lowered charges.
Conclusion
Despite generating smaller revenue, emerging organizations can target customers who rejoice with convenient and flexible payment options. Our list of innovative payment processing solutions for small businesses will allow you to upscale your game and offer customers the convenience they seek today and in the coming years.
