You’re a business owner and you just found out that your payment service provider is going to charge 10% more for fees. You need to switch providers, but there are so many options on the market! Where do you start? This article will guide you through everything from choosing what type of payments to accept, where to find a provider, and how much they cost.
How do Payment Service Providers work?
There are several options for accepting payments. You can accept cash, checks or you might be one of the many businesses that started to accept e-payments online through credit cards, Open Banking, PayPal and digital wallets like Google Pay. The last option is growing in popularity as more people want to use smartphones instead of carrying their wallet with them everywhere they go.
When it comes to processing electronic payments there are four main players on the market: merchant service providers (MSPs), independent sales organizations (ISOs), payment facilitators and aggregators/gateways. All of these types provide some sort of service related to either acquiring new customers or facilitating transactions on your behalf for a fee – which means you
What is a Payment Service Provider?
A payment service provider (PSP) is a company, or group of companies that provides financial institutions with services to process electronic payments on behalf of merchants and businesses. They handle everything from processing transactions and refunds, fraud screening, risk management as well as providing customer support for the merchant bank account owners they work with. Some PSPs are more involved in their clients’ business than others – i.e., those who just provide technical execution will not have dedicated account managers whereas providers working directly with you might also assist you if your personal details need updating or you’re having issues logging into your online banking platform.
The types of payment service providers out there include: acquirers/merchant banks – these typically manage one-to-one relationships with merchants and are responsible for the transaction from beginning to end, including providing customer support. They can be a one-stop shop as they might also provide payment solutions such as mobile payments or online wallets; aggregators – these simplify acquiring by consolidating all business banking information into one place and only charging you for transactions instead of monthly fees; independent sales organizations (ISOs) – these are third-party intermediaries between acquirers and merchants, acting as the merchant’s agent to accept payments; payment facilitators – similar to ISOs but they usually do not have their own accounts with banks. They work together with a PSP so you only need one application form and deal directly with them for all your banking needs.
How do Payment Service Providers Make Money ?
There are three main ways for payment service providers to make money. The first one is called the interchange fee, which can be either a percentage or a fixed amount of the transaction. The second one is called the assessment fee, which can be either a percentage of revenue or an interchange fee. The third type are card-processing fees that include account set up costs and monthly minimum payments.
On top of these three main types there might also be additional charges when you want to add new payment methods like Apple Pay or another form of payment that your customers might prefer. These additional fees are called surcharges and they can be either a percentage of the transaction or per-transaction fee.
This will affect your decision-making process as a business owner and it’ll help you to negotiate the best possible deal with your provider. Generally, there are three ways providers generate revenue:
Interchange plus pricing – this method takes into account both the rates per transaction for credit card processing (interchange) and markup or margin on top of those interchange rates charged by Visa/Mastercard/Amex etc., which means – higher volume equals lower costs; and vice versa.
Transaction rate – taking a fixed amount from each transaction processed through its payment platform, regardless of the type of payment accepted, where it comes from or any other factors.
Why Use a Payment Service Provider?
There are a few key reasons why you should consider using PSPs:
- Offer more advanced and secure payment solutions;
- They can help with fraud management by monitoring suspicious transactions, helping to prevent losses from cybercrime;
- The vast majority of payment service providers provide support – this means that they will always be there when something goes wrong or you need advice on how to improve your business.
Some providers offer online chat where customers can directly interact with their expert team members who will answer any questions regarding credit card processing, reporting and other general enquiries about the account itself. Another reason is because as long as businesses maintain good records it may not even be necessary for physical cards to change hands between parties involved in a transaction, as a PSP can facilitate transactions remotely by verifying all the information it has been given.
In conclusion, there are many reasons to use payment service providers for your business and if you do not have one yet – consider looking into available options so that you can take advantage of their features and help expand your company’s reach.
Which Payment Service Provider is the Best?
There is no such thing as the best payment service provider because every business owner has their own unique needs and it’s important to understand your requirements before making a final decision. It makes sense to go with providers that offer you transparent pricing, provide support 24/h and have all the advanced features for safe online transactions. Be aware of hidden fees when signing up, make sure that you are given an itemized list of services included in monthly or yearly costs so that there won’t be any unpleasant surprises on billing day! This will allow you to choose wisely between available options while still maintaining profitable revenue streams for your company.
Choosing the Right Payment Service Provider for your Business
There are a few things that you should consider when looking for the best payment service provider:
- What types of credit cards do you want to process? Are there any upcoming trends in your industry which could affect future plans and requirements – e.g., contactless payments, Apple Pay etc.?
- How many transactions per month can be expected from your business model? Do these numbers change over time/seasonally or predictably?
- Does your business have a physical presence or is it strictly online-based only with no brick & mortar stores at all? If this number changes, will costs rise accordingly due to increased risks involved in accepting card payments remotely or does pricing vary based on geographical location alone (e.g., different country, different rates)?
- Do you want to use more than one payment service provider at the same time? If yes, would this involve opening new bank accounts or can you use the same account for each provider?
By asking these questions and understanding your requirements, you will be able to make an informed decision about your needs and choose the best payment service provider for you.