The Advantages and Disadvantages of Various Payment Processing Solutions
In the world of online commerce, it is very important to understand how online credit processing works in order to be able to create a safe environment for your customers. There are many parties involved in making the virtual space a safe one for shopping and online payments, so that is why so many people are dedicated to offering you the best services out there. This is also the case with payment processing solutions. With so many of them out there, it might be difficult to choose the best one for you, without knowing all of the pros and cons.
The Inner Workings of Online Credit Card Processing
For any new online business owner understanding how the money from his clients gets to him in the fastest and safest way might be challenging. There are a number of new terms to get accustomed to and getting to know how each system works, and how they all work together, might be quite difficult at first. But with the right amount of time and research, anybody can figure it out and be on their way to a successful business.
Online credit card processing is somewhat of a complicated process that involves a lot of “moving parts”. It all starts with the merchant account. Any business wanting to accept payments over the internet from clients has to have one of these accounts with a merchant bank. The account is the way a merchant interacts with the credit card processor and ultimately with the client himself. These accounts aren’t very difficult to obtain. The best thing to do is go to your nearest merchant bank or the bank where you already have a personal account and ask them what you need in order to open a merchant account. Keep in mind that you will be required to give out some information, for security reasons. If this is not your first business, don’t worry. Fee rates might be a little higher at first, but once the bank is convinced you are a trustworthy client, they can be revised.
The next piece in the online credit card processing puzzle is the payment gateway. This is vital for any online business. It helps if you think of this piece of software as a virtual representation of a classic POS terminal. The software enables the credit card processor to interact with the merchant bank and authorize or decline the transaction. There are quite a few options out there when it comes to payment gateways, so business owners should be advised to choose carefully. Not any payment gateway solution is suited for any business. There are some gateways that are recommended for smaller businesses. These use the security protocols and features of bigger, already established payment platforms, such as PayPal in order to protect client information. And there are also those designed for larger businesses, that although require some investments on the owner’s behalf, better manage the entire shopping experience.
Once the business owner has chosen the right gateway and has established an account, online credit card processing boils down to a series of data exchanges between the card issuer, card processor, and the banks of both client and business. The entire process only takes a few seconds to complete, but settlement between the merchant bank and business owner can take up to a few days, depending on the amount of money and the transaction volume. Nevertheless, this is one of the safest and fastest ways of doing business today, and that is why more and more businesses are starting to use it in order to become more accessible to even more clients.
Pros and Cons of Payment Processing Solutions
Payment processing solutions come in all shapes and sizes. Many of them offer complex security protocols and safety features in order to protect client information and prevent data leaks of any kind. But choosing the right solution for your business might be difficult, especially if you are not accustomed to working with them. Like all products, they all have their pros and cons. The important thing is to do your research before choosing the one best suited for your business.
1. PayPal
Maybe the best-known payment processing solutions also has some strong points as well as some weak ones. With 286 million accounts, 22 million of which are merchant ones, PayPal charges a 2.9% + $0.30 for each and every credit card transaction. The beauty of the platform is that you don’t need an account in order to make payments for various products and services
Pros:
• Fast and safe payment processing
• Easy setup and use
• Great platform integration and good development tools
• Large international presence and multi-currency support
Cons:
• Some issues with account stability
• Customer support could use some improving
• High fees for chargebacks and other services
• Not many options when it comes to using and customization
2. Stripe
With pricing comparable to that of PayPal, Stripe is a crowd favorite when it comes to e-commerce stores and website integration. The platform is also known for its scalability, which lets it accommodate different size merchants, customizability, and flexibility.
Pros:
• Flat fees and rates with no hidden costs
• Highly customizable to almost any kind of business model
• Good customer support
Cons:
• In some cases, the platform can freeze funds or cancel accounts
• Some features might not work as well as customers would hope
3. Square
Even though the company started out as a POS processor, Square has been quickly gaining ground in the online payments world. The rates might be a bit higher than those of others but it has a strong community and prospects of evolvement, especially among small businesses.
Pros:
• Intuitive user interface
• Very good mobile payment processing experience
• Quick setup and easy configuration
• The pricing is transparent
• Decent reporting system, easy templates, and automated invoicing process
• Good reporting system, easy-to-use templates, and automated invoicing capabilities
Cons:
• Not really the best choice for middle to large businesses due to the high flat rate per client
• Tech support needs improving
• Standard risks associated with aggregated merchant accounts
4. Authorize.Net
As far as payment processing solutions go, Authorize.Net has some of the best features out there, and this is mainly because it is Visa owned. The all-in-one option comes with a gateway fee of $25 monthly and a 29% + $0.30 per transaction.
Pros:
• Over 20 years of payment processing experience
• Simple and intuitive user interface
• Efficient customer support services
Cons:
• Although present on an international scale, the countries where international transactions are accepted from are limited
• Limited currencies supported
5. Amazon Pay
Maybe PayPal’s biggest rival in terms of payment processing solutions, Amazon Pay has comparable rates to them. The only difference being a 3.9% + $0.30 on international transactions. Also, as opposed to their big rival, customers have to have an Amazon account in order to use the platform.
Pros:
• Strong fraud protection service
• A good reputation as an Amazon brand service
• Integration with e-commerce platforms and business systems
• Good user interface design and easy to use
Cons:
• Higher fees for international purchases
• Reserve system (the platform can hold the initial transactions in reserve for 14 days when you first begin processing payments)
• Standard risks connected with aggregated merchant accounts
