Payments Processing

Payment Processing

Merchants looking to grow their customer base and increase sales have been accepting additional forms of electronic payments. Online payment processing is not limited to debit and credit cards anymore. With advances in technology, the payment services industry has evolved and offered merchants new platforms to accept payments.  Merchants have the option to accept a number of different payments; from bank cards to cryptocurrency.

Depending on the type of business, and the preferences of customers, merchants might consider offering different payment methods. General ecommerce businesses have faired well by offering credit and debit card payments along with ACH options to customers. Higher risk merchants have begun offering a wider range of choices, including e-check and cryptocurrency options.

The most widely accepted payment types by ecommerce merchants today include:

With many different payment platforms and services available, understanding the benefits of each can help merchants optimize their customer base. Businesses can offer new or improved products and services by providing customers with additional payment options. Our staff at Allied Payments can also help merchants with any questions or concerns regarding their business or offering additional payment services.

Payment Processing Services

Understanding the different types of payments and how to utilize them for different business models can be very beneficial to merchants. The spending habits of customers, the billing cycles of a business and the goods sold can all play into finding the best payment service solution.

Payments today can be broken down into 2 categories. Both can offer merchants benefits along with some drawbacks, depending on the business using them.  The most common forms of payments today include:

  • Credit Card Processing
  • Check Processing

Most merchants accept credit and debit cards today.  As more and more people have opted to forgo cash and pay using a bank card, merchants have needed to remain competitive with other businesses and online stores.  The acceptance of credit cards has also been a necessity for merchants looking to accept online payment through their ecommerce store.

In more and more instances, the option of e check has grown among merchants.  As customers have become more receptive to this payment method, the usage of direct payments taken hold. Recurring payments along with higher risk products and services have relied heavily on echeck services while becoming increasingly popular for general ecommerce sales.

Methods of Accepting Payments

Today, there are a number of different ways merchants can accept payments. Technology within the financial industry has taken over with new services to make purchasing fast and easy. Combined with the growth of the internet, the purchasing trends of customers continue shifting to online marketplaces.

Accepting payments can be done through a variety of different payment methods and services.  For this reason, savvy merchants have opted to add many of the available services to their list of acceptable payment types.  Depending on their payment terminal, merchants can accept different payment types.  The most common types include:

  • Retail:

Still the most commonplace for payments to occur, the retail storefront requires merchants to utilize a POS terminal. Businesses include professional office and restaurant merchant account solutions. Payment processors providing these services will set businesses up with an acquiring bank to manage card transactions. Payment cards can be accepted with a credit card machine, POS or card swiper depending on the merchant's needs.

  • Internet:

Viewed as one of the lowest cost methods of opening a business, the exponential growth of the internet has made e-commerce the fastest-growing segment of the payment industry. New technologies allow merchants the ability to integrate into multiple payment platforms with an easy to use checkout process.  These payment gateways provide the highest levels of encryption security to thwart any potential fraud. Many offshore and high risk merchants use a high risk credit card processing service through an internet merchant account.

  • MOTO:

A once-popular method of making payments was through a Mail Order or Telephone Order environment. Though still common for certain types of businesses, many of these merchants have moved to an ecommerce environment. Most businesses today that accept MOTO payments are able to utilize the virtual terminal functions of a payment gateway integrated into a ecommerce website.

  • eWallet:

The use of eWallets by customers has become one of the fastest-growing methods of payments.  As more and more customers are adopting these payment methods, the need for merchants to accommodate these changing trends continues to grow.  Companies such as PayPal and Stripe offer these payment systems that are ideal for startup and low volume businesses.  For most businesses, even some startups, these programs are more cost prohibited with high fees.

Payment Processor Fees

Every transaction, regardless if its a credit card, debit card or check will incur a fee. Most credit card processing fees can be assessed by either the customer's bank or the merchant's payment processor.  Depending on the processor, payment processing fees can be charged in a number of different ways.

While many of the fees charged by the customer's bank can be straight forward, the way these fees are presented to merchants can vary.  Understanding the various fees and how they are billed to the merchant can be the difference between a fair agreement or an expensive mistake. The most common fees charged during a transaction include:

  • Discount Fees:

Taken out of every settlement, the discount is the percentage during the transaction. These fees are determined by a combination of the fees charged by the customer bank and payment processor. For credit cards and debit cards, pricing models based on a number of factors can affect these rates.  Similar to the payment card industry, a check can incur anything from a set transaction fee to a discount fee attached to the transaction fee.

  • Transaction Fees:

The first swipe of the customer's payment card incurs an authorization fee while additional transactions, such as settlements, will be charged as a separate transaction fee.  High volume businesses that are charging high numbers of cards daily will want to verify the prices of these fees.  Many times processors will charge only an authorization fee as a way to reduce costs for the merchants.

  • Statement Fees:

A monthly account fee is usually billed to open accounts by the payment processor or merchant acquirer. Monthly minimum fees may also be required of low volume businesses if they do not reach a certain monthly threshold for fees.  Merchants will want to check all monthly fees as it is common practice to waive statement fees and move the fee under another category.

  • Gateway Fees:

Charged to online merchant account and virtual terminal merchants using a processor's payment gateway.  Most payment service providers charge a separate fee for using the gateway though some will incorporate fees into other charges. Payment gateways will usually include transaction and monthly fees plus additional fees for any add on services used by the merchant.

  • Other Fees:

Merchant accounts can be full of different fees. Many of these fees will be based on a per-occurrence basis, such as batching services, chargebacks, retrievals, and customer service inquiries. Other fees will be billed to merchants on a monthly basis, varying from security to account management services.  Yearly fees can also be charged, these include PCI Compliance or annual registration fees.  While some of the yearly and monthly fees are not negotiable, some fees can be negotiable or removed as a junk fee.

Finding a Processor

Merchants looking to open their first merchant account or want to change to a new payment processor should ask prospective processors a number of questions before taking the time to fill out an application. Depending on the type of business the merchant is operating, a specific merchant services company might be required.

For general commerce businesses, almost any merchant services company can accommodate the needs of these businesses.  Regardless of the business, whether its e-commerce, a restaurant or professional office; merchant services companies will be more than happy to accommodate these merchants.  Most of these accounts have negotiable terms that can easily be shopped between providers. Merchants that are operating in higher-risk industries need to spend more time finding a suitable payment services company.

Asking the proper questions of a high-risk processor can make the search for a credit card processor less time-consuming.  Many times merchants find out that the processor is unable to accommodate a business type or their rates are astronomical after investing significant amounts of time with them.  Instead of filling out numerous applications only to be declined or have to decline an application approval due to the terms, we have created a list of questions to ask when searching for a merchant services provider.

  • Transaction Fees

Requesting a breakdown of fees from merchant services providers can help businesses compare costs. Existing businesses can also run a rate analysis to determine if and how much could be saved by using a merchant processor over another. A side by side comparison can significantly help merchants determine the best option for their needs.

  • Account Reserve

Higher risk businesses with questionable sales or products or a limited business history might be approved for a merchant account with a reserve. In many instances, this can be negotiable and over time can be reduced or even eliminated. Ask your merchant processor for more information and what the process is to remove this fee.

  • Set Up Fees

In certain situations, set up fees are used for higher-risk businesses. Knowing the terms of the set up might be able to help merchants lower or eliminate these fees. Instead of paying upfront, some processors can allow merchants to pay this setup fee from out of their settlements.

  • Chargeback Threshholds

Knowing the limits of the merchant account for chargebacks can save merchants time and money. Having funds held and having to open new merchant accounts can become very costly and cumbersome for merchants trying to run a business. Understanding their limits beforehand can help merchants decide if they want to pursue that merchant account.

The staff at Allied Payments will be more than happy to help merchants understand the important questions to ask processors prior to beginning their services. Having a full and complete understanding of the available services helps the processors and merchants have a successful and mutually beneficial relationship.

Begin Accepting Payments Today!

Merchants looking for quotes for a quote on their existing business, or merchants starting a new business are encouraged to contact one of our team members. The payment processor staff at Allied Payments will be more than happy to help answer merchant questions or to provide additional information for their business.