Payment Processing: The Basics and 5 Steps to Get Started
Before 2020, online shopping and processing payments with the use of credit, debit, and other forms of online payment weren’t new. However, as the COVID-19 pandemic spread across the globe, both residents and business owners were forced to make changes due to necessary social distancing regulations and stay-at-home orders. Payment processing provides businesses to operate beyond hand-to-hand cash or check transfers and provides convenience for both consumers and businesses. Whether you’re starting a new business or you simply haven’t ventured into the unfamiliar territory of payment processing, it’s not too late to get started. Online shopping and convenient, secure payment methods aren’t a fad that will pass when things go back to normal or reach a new normal. They’ve become a part of the shopping/payment process and most consumers expect businesses to use them.
What is a Payment Processor?
A payment processor is a company that handles your customer’s transactions. To do this, the company relays information from the customer’s credit and debit card payments between the customer bank and your bank (typically called the merchant bank). The payment processor determines if there are adequate funds in the customer’s account to complete the sale. As long as funds are available and the card is valid, the payment will be completed without any further interaction from you or the customer.
Payment Processing Terms
A payment processor is used so you can seamlessly accept payments from your customers, which means the entire process usually takes place without interruption or further required action on your part. Still, it can be useful to understand certain terms that surround the process so you’ll have a better understanding of how the process works. These terms describe the working parts of payment processing.
- Issuing Bank: This is the bank where the customer obtained the credit or debit card to make the transaction. It can be a credit card company or a bank where the customer holds an account and has been issued a debit card.
- Merchant Bank: This is the bank where you receive your payments. Whether the account is owned under the company name or your name, it’s typically an account used for business purposes.
- Payment Gateway: The software that securely encrypts your customer’s payment and sends it to the processor, is called the payment gateway. While it’s similar to the job of a payment processor, the tasks are not identical. The payment processor could be considered more like a vehicle that allows the payment to complete the circuit from customer to merchant, while the payment gateway is the communicator that informs whether a payment is approved or denied. Your merchant account may include your payment gateway.
What You Can Expect When Using a Payment Processor
If you’re new to the world of processing payments, the entire process can seem like a different language. Still, most of the interaction between your customer’s bank and your bank is completed without any effort from you. Here’s how the process works.
- A customer finds a product on your website, proceeds to your virtual checkout, and pays.
- The information from the transaction (card number and amount of sale) is encrypted to prevent fraud.
- The transaction information reaches the customer’s bank where it is either approved or denied.
- If the transaction is approved, funds are sent from the customer bank to your merchant bank and deposited in your account.
The first part of the process is usually completed in seconds. Still, the process isn’t complete until approval and the insertion of funds into your account. This part can take from 24 to 48 hours, up to several days depending on many factors specific to the transaction.
5 Steps to Getting Started with Payment Processing
Now that you know a little more about how payment processing works, it’s time to learn how you can apply the process to your business. Most customers expect to find your business online and often wish to make an online purchase or buy an online pick-up-in-store purchase immediately upon finding your product. In fact, 79% of consumers take relevant action on their phone before making a purchase. Many mobile phone users (67%) window-shop online for fun, and 77% of these shoppers make impulse buys. Without the use of e-commerce and the ability to process online payments, you could lose these potential sales to your competitors. If you’re ready to take the plunge and provide your customers with the convenience they expect, take these steps to get started using a payment processor.
1. Determine the Costs
As a business owner, you understand the benefits of investing in products and services that will grow your business. Getting started with payment processing can come with a variety of fees depending on your needs and current situation. There will be fees included with setting up a merchant account and securing a payment processor that meets your needs. Additionally, creating a professional website or digital storefront is an additional cost that’s often overlooked.
Don’t let the costs discourage you from expanding your business with a payment processor. MobyCap provides businesses with a variety of fast and flexible funding options to help you expand your business without the hassle of traditional business loans. With an easy application process and an accelerated path to funding, MobyCap can help you get the money you need to invest in the payment processor you need to provide your customers with the experience they expect.
2. Open a Merchant Account
If you haven’t done it already, you’ll need to set up a merchant account that will allow payments to be deposited. A merchant account is an account with a credit card merchant processor qualified to underwrite and settle your transactions. When a customer makes a payment, the funds will be deposited into a merchant account before being moved to your business account.
When applying for a merchant account, you’ll be required to provide information about your business including the type of your business, length of time you’ve been in business, your professional financial history, previous merchant accounts, and personal financial history. For individuals with a new business, it may be easier to obtain a merchant account from the bank where you already hold a personal or business account.
3. Find an Outstanding Payment Processing Company
In the same way that your customers can make payments in a variety of different ways, payment processors don’t all work the same way. Your payment processing company should provide options that meet your needs and allow you to provide your customers with an unbeatable experience.
MobyCap offers a variety of payment processing options that can be customized to fit each customers’ specific needs. While many companies provide one-size-fits-all options, MobyCap offers individualized solutions that cost a fraction of the price of bigger solutions with services you can’t use. With flexible services, the use of analytics, real-time reporting, and a payment gateway that allows users to accept payments into any web or mobile environment, your customized payment processing solution will have all the benefits major companies utilize.
4. Set Up Your Online Store Front
Now that you have a way to accept customer payments, it’s time to set up a place for your customers to buy your products. If you already have a business website, you’ll likely want to set up your digital storefront there. As a new business interested in accepting online payments, setting up a website is a good first step. Whether your business includes a brick-and-mortar store, or you sell all your products online, a website is a valuable sales tool.
Your digital storefront should make the purchase process seamless and as quick as possible for your customers. Setting up online payment forms and embedding a “buy now” button in your store will assist customers through the payment process. Your storefront can also be used to incorporate coupons and discount codes in the payment process.
5. Acquire the Tools You Need
Determining the tools you need to process payments will depend on your needs and the needs of your customers. Many software types allow businesses to accept payment and send out products. However, you may wish to invest in user-friendly software that makes the process easier for your customers. Additionally, you may need a system that accepts recurring payments and phone orders. Some businesses also use tools to accept credit and debit card payments for point-of-sale card processing and mobile payments. For many merchants, finding a suite of products provides the most affordable way to get all the tools you need.
Getting started with payment processing can seem like an overwhelming process, but when you break down the working parts and the steps required to get started, it’s a task that can be completed by any type of business. More importantly, having the process in place can mean a big pay-off for your business. Don’t let limited funds stop you from investing in your business. Use our online form to get in touch with MobyCap or email us at firstname.lastname@example.org to learn more about our funding options and how we can help you prepare your business for the future.