Payment processors are services or systems that ensure secure transfer of funds from customers to the businesses they’re buying from. These processors usually offer a variety of payment channels, including credit/debit cards, digital wallets, and bank transfer options, among others.
Finding the ideal payment processor for your small businesses will make your transactions cost-effective, fast, and convenient. It can be good for business, too; customers are likely to choose your offering if you provide a payment option they prefer. At Remitly, we understand that there’s a bewildering choice of payment processors out there, so here’s our guide to help you out.
Read on.
How payment processors for work for small businesses
When a customer buys something online or in-store, handing over their payment details in the form of a credit card, digital wallet, or bank transfer is merely the first step in the payment transaction.
The payment processor communicates to the customer’s bank or digital wallet provider to verify the information is accurate, and there are enough funds to complete the payment. If everything checks out, the transaction is approved and the payment processor facilitates the transfer of funds from the customer’s account to the merchant’s.
The payment processor then provides details and confirmation of the transaction to both the customer and the merchant.
Types of payment processors for SMBs
Small business payment processing comes in a variety of types, and understanding how each type works can be crucial in determining the best one for your payment processing needs.
- Traditional payment processors: These companies offer intermediary services between the merchant and the customer to ensure successful funds transfers. They usually charge a fee for their services. Traditional banks fall into this category.
- Third-party payment processors: These companies handle transactions on behalf of merchants. They also offer extra features such as invoicing, reporting, and fraud protection.
- Integrated payment gateways: These are among the best payment processors for small, online-only businesses. They make it easy for customers to enter their payment details through an online portal and complete the transaction securely.
Types of payment processing methods
Another important detail to keep in mind is that the various payment processors for small businesses provide different payment solutions. Some specialize in online services while others provide special software to facilitate transactions.
Online payment processors for SMBs
These companies make it easy for customers to pay over the internet. Payments are made through credit cards, digital wallets, and bank transfers. Some examples of such providers include PayPal, Stripe, and Square.
Point-of-sale systems
This type of small business payment processing system is common in brick-and-mortar establishments. It works by allowing customers to touch their credit or debit cards to a machine. These systems can also work by integrating NFC and chip card payment options. Some examples of point-of-sale system providers include Clover, Square POS, and Toast.
Credit card processors for SMBs
These are service providers that offer credit cards as the primary mode of payment. The customer’s credit card should have sufficient funds for transactions to be approved without any hitch. Credit card payments are done online or by presenting the card to a compatible machine.
Cryptocurrency processors for small businesses
Though not many customers are paying this way just yet, cryptocurrency processing companies are already around to make it easy for small businesses and customers to transact using Ethereum and Bitcoin, for example. They can also handle the conversion of digital currencies into traditional currencies.
Mobile payment processors
These aren’t really online payment platforms as such, but most mobile payment processors enable customers to make quick payments with their cell phones, by simply presenting them to the POS system device as if it were a credit or debit card. Some examples include Google Pay, Apple Pay, and Samsung Pay.
All-in-one payment processors
These payment processors offer different options including online, POS, and credit card services. They’re a convenient payment option for small businesses that sell goods or services both online and at brick-and-mortar locations.
Choosing the best payment processor for SMBs
Here are a few things to keep in mind when weighing up your options in the search for a payment solution that matches your needs.
Transaction fees
Some processors charge a flat rate for each transaction, while others take a percentage of the payment. Some processors charge a variable amount depending on the type of transaction and the day’s exchange rates. Consider the option that seems the most suitable for your kind of business.
Payment methods
Some processors specialize in online payments while others specialize in credit card payments. If the customer is there in person for most of your business transactions, the credit card processor may be a suitable option. But if your business doesn’t need in-person interaction, online processing may be the best option. Many of the processors offer multiple payment options, so you may well find one that’s right for you and does both.
International support
If your business operates globally, or simply receives orders from all around the world, you may want to choose a payment processor with support for multiple currencies, and that’s available in as many countries as possible.
Integration and features
Consider if the processor can easily integrate into any existing systems in your business. Does it connect to your online platform, POS, and accounting tools? Go through its features to find out if they can add value to your business.
Security
Strong security features are unfortunately a must-have these days. Fortunately, most payment processors include things like encryption and fraud protection measures.
Popular payment processors for small businesses
It’s a fairly crowded market, with lots of options. But these are some of the most popular, chosen by large numbers of small businesses.
Square POS
If you’re running a retail store or restaurant, this may be a good option. Square POS provides point-of-sales payment systems and software to make transactions fast and convenient. It offers features such as appointments and invoicing that help simplify work, and its proprietary hardware ensures customers can make payments through credit and debit cards.
Pros/Cons: Affordable and easy to use, with flat-rate pricing. Also provides analytics with no binding contracts. But some other features like inventory management are very limited, the customer support is limited, and there’s not much in the way of customization.
BitPay
If your business accepts cryptocurrency payments, you may want to consider BitPay. Founded in 2011, it’s headquartered in Atlanta, Georgia and supports a number of cryptocurrencies.
BitPay offers a debit card you can fund directly from your wallet and spend anywhere. It also features a mobile app that makes it convenient for customers to make payments directly from their handheld devices, so though it’s crypto-focused, it offers everything you’d expect from this type of solution.
Pros/Cons: Available in all 50 US states, and you can earn cryptocurrency rewards. But it’s crypto-focused, so doesn’t have that many features, and its fees are relatively high.
Stripe
Stripe is jointly headquartered in San Francisco, California, and Dublin, Ireland, but has offices around the world. It allows businesses to accept a range of encrypted payment methods through a mobile card reader and provides the terminals.
You can also access reporting, analytics, and banking services to help manage your business, and if your firm is growing, you can customize the solution to suit your needs.
Pros/Cons: Stripe is easy to use and customizable, but has relatively high transaction fees and the payouts can take a little longer than some other solutions.
Clover
Clover offers a whole range of business services, and payments is just one of them. Its payment platform accepts credit, debit and gift cards as well as the standard payment through NFC-enabled cell phones.
Pros/Cons: User-friendly and intuitive, with 24/7 customer support. But there’s a monthly fee, the pricing isn’t particularly transparent and there can be long contracts involved.
Venmo
Venmo is particularly popular with younger consumers, so if you’re in a youth-oriented sector, it may be a good choice. It allows businesses to accept payment through a mobile-first platform and it’s especially useful for freelancers or event-based businesses.
Pros/Cons: Low transaction fees, no monthly fee and widely used. But there are extra charges for instant transfers and Venmo’s app only works with US-based accounts and cell phone numbers.
Get it right and it’ll make a big difference
The providers we’ve covered here are some of the most popular, but there are others that are part of larger, complete business software solutions like Paypal for Business, Shopify and so on.
With so many to choose from in a world where younger consumers in particular handle very little cash, the right payment process provider is actually a pretty important choice for a small business. We hope our guide will help you make the right call for your business.
FAQs
What’s the preferred payment processor for small businesses?
The best payment processor for small businesses depends on the type of business and the method of processing payment you need. Some good examples of payment processors include Stripe, BitPay, and Square POS.
What is a payment processor for SMBs?
A payment processor for SMBs is a service or system that facilitates transactions between a buyer and a seller. It acts as an intermediary to ensure safe and secure transactions between two parties.
What types of payments can payment processors handle?
Payment processors handle a variety of payments including bank transfers, online payments, digital currencies, credit and debit card transactions, and mobile wallet payments.