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What you don't know about payment processing can hurt your company — and your bottom line.
Payment processing is necessary for businesses to accept credit card payments, but it comes with risks that could open your business to fines, fees and operational challenges. Unless you adhere to best practices, you risk damaging your company’s reputation and breaking your customers’ trust. Below, we’ll explain how you can conduct payment processing while still proactively protecting your customers’ sensitive payment data.
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What you don’t know about payment processing could hurt your business, even when you partner with the best credit card processors.
Small businesses that accept credit cards are subject to processing fees. Credit card processing fees range from 1.7 to 2.05 percent for in-person transactions and 2.25 to 3.25 percent for card-not-present transactions.
These costs may sound minimal, but they add up, especially when applied to big-ticket items. Some payment processors add a flat fee per transaction, which impacts high purchase volume orders.
Consider the following factors to help reduce your credit card fees:
A credit card company’s processing fee structure may be a fixed rate or an interchange plus rate.
Interchange plus rate:
Fixed-rate:
Most debit and credit cards include a magnetic stripe on the back, an EMV chip on the front and near-field communication (NFC) mobile payments with contactless tap technology.
Still, there are online payment security differences when a card is swiped versus tapped or inserted into an EMV payment terminal.
When customers use an EMV chip card or an NFC mobile payment option, like Apple Pay, the processing environment utilizes a security measure called tokenization. This process replaces the sensitive cardholder data, such as the 16-digit personal account number, with a series of randomly assigned numbers used to process the payment.
This means data thieves can’t use the token to commit credit card fraud or identify the account owner.
Chargebacks are when transactions are reversed due to a customer complaint or fraud. These incidents typically cost $15 per occurrence. Credit card processors may even drop companies with numerous chargebacks.
Here’s how businesses can avoid chargebacks:
According to a Netwrix Research Lab report, 68 percent of surveyed businesses — both large and small — experienced a cyberattack in the past year. Additionally, Tripwire’s Business Impact Report revealed that 73 percent of small business respondents reported experiencing data breaches or cyberattacks.
If there’s a breach, your business may endure the following ramifications:
Merchants that don’t accommodate EMV chip cards could be held liable in the event of a payment security breach. You could be held responsible for costs associated with the breach, including the following:
Consider these best practices to protect your business from a data breach:
Many ransomware attacks start when an employee or contractor unknowingly clicks on a malicious link in an email — not from sophisticated hacks.
One employee’s innocent mistake can compromise payment security. Employee screening, monitoring, training and permissions are key.
Use the following practices to minimize payment processing expenses.
Credit card processors’ rates, fees, software features, hardware and customer service vary widely, so vetting credit card processing companies is essential.
“Common issues that pop up when integrating credit card processing include a lack of transparency when it comes to fees and contract terms,” said Jeff Bucher, senior product strategy manager at Alkami Technology. “These impact mission-critical components like processing times and rates and common hidden fees can be statement fees or non-compliance penalties.”
Review each company’s costs, features and reputation before making a choice.
“Flexibility is key, and I’ve found that working with processors who offer month-to-month agreements makes it easier to pivot if a better solution comes along,” said Darian Shimy, CEO of FutureFund Technology. “I’m also cautious of providers that push equipment leasing at inflated rates. It’s almost always better to buy outright.”
The credit card processor or processing plan for startups isn’t always the best choice as your business scales. A higher processing volume can make fixed-rate credit card processing fees too costly, and you should consider switching to an interchange-plus model. You’ll likely find that you need processing software with more advanced capabilities, such as industry-specific features or robust customer management and marketing capabilities.
Explore whether your current credit card processing company has a different plan that more adequately meets your needs.
Shoppers use digital payment methods in addition to credit and debit cards, so accepting various payment types is a win-win.
Most payment processors support multiple payment types, but you may need to contact your company to ensure digital wallets like Apple Pay, Google Pay and Samsung Pay are accepted.
Investigate international payment processing rates if a significant portion of your sales is international or you plan to expand your e-commerce store globally. A wide range of processing rates exists for international transactions and currency conversion.
Shop around for a payment processor with lower international processing rates. Be sure to include language translation on your online checkout pages and account for additional costs, such as value-added tax or tariffs.
You’re still responsible for securing customer payment data, even if your processor is PCI-compliant. Here’s how to protect payment data:
The latest hardware allows you to accept chips and taps (EMV and NFC). These methods are more secure and user-friendly for staff and customers. Newer card reader hardware may also include helpful features, like allowing the cashier to swivel the touchscreen so the customer can input a PIN or add a tip.
Mobile POS systems are a must for mobile businesses, including food trucks and farmers market vendors. However, they’re also a boon for fixed-location businesses. Fast food and quick-service restaurants and retailers can reduce customer waiting time by sending out cashiers armed with mobile credit card readers or mobile POS devices. Mobile readers can also be used for businesses with large showrooms where customers order products for delivery.
Add fraud prevention software to your online store or app because these tools look for suspicious patterns and anomalies that could be signs of fraud. Many credit card processors allow you to add fraud prevention features such as zip code, CVV or address verification to your account (frequently for an additional monthly fee).
“These features allow businesses to choose optimal processors for specific transaction types, maximizing both efficiency and cost savings,” said Amit Malhotra, head of partnerships at Wink. “Taking advantage of modern tools and integrations also reduces operational friction, ensuring businesses can scale without compromising security or customer satisfaction.”