27/05/2021

How to choose a Payment Processor

By Mariana Marques

By Mariana Almeida Marques

The Paytech industry is loaded with companies that offer innovative and disruptive services to enhance your company’s payment system. But in the midst of so many great products, it can be difficult to choose which one is the right fit for your company. In this article, we will guide you through some fundamental components to take into consideration when choosing a payment processor for your business.

 

Fraud protection

Payment processors can also be called Payment Service Providers (PSP) or Merchant Service Providers (MSP). Even though they all have fundamentally the same role in payment processing, there are some aspects that differentiate them. For example, some payment processors offer more features and support than others, such as tighter fraud protection and PCI compliance assistance.

Payment processors, along with Issuing banks, are responsible for verifying the cardholder’s payment details so that a transaction can be authorised. The more complex the verification process is, the more protection it offers against fraud. Thus, your payment processor should have strong fraud protection tools in place.

Besides the most widely used CVV and AVS verification, some payment processors use technology that collects data from billions of transactions. This data is then analysed and used to develop fraud patterns and automatically identify any fraud suspicion. Finding a payment processor that is PCI compliant gives you more reassurance that their payment processing is secure.

Fraud protection in the payments industry

 

Authorisation rates

An authorisation rate indicates the percentage of transactions that were successful, against the total of transactions. Authorisation rates are important because a higher authorisation rate means less money lost with failed transactions. Some payment processors have better authorisation rates than others, so it might be worth doing some research to find which ones can better optimise your current rates and increase your profit.

 

Type of payments

Another point of differentiation is the type of payments they accept, as some payment processors focus on online payments, whilst others focus on in-store payments. It is worth considering what the company’s plans are, so you can choose a payment process that best accommodates your needs.

Square, for example, has a strong focus on Card Present transactions and is best known for the Point of Sale infrastructure it sells to restaurants and retail shops (though it also offer payment processing). GoCardless, on the other hand, specialises in Card-Not-Present transactions as deals with online payments such as Recurring Payments, invoices and subscriptions.

 

Pricing and fees

There are some unavoidable fees that the merchant has to pay for using a payment processor. Transaction fees consist of the interchange rate, markup fee and assessment fee, and are paid to Issuing bank, payment processor, card network and Acquiring bank- all the players that took part in the payment transaction. Flat fees are paid exclusively to the payment processors as a set monthly sum for their service.

Debit and credit cards accepted by payment processors

Different payment processors have different pricing models, and whilst some are very transparent with the fees they charge, others can have hidden fees that are difficult to predict. Tiered pricing is often the most costly model: rather than paying an interchange fee directly, the merchant pays the payment processor a tiered rate, who is responsible for paying the interchange fees to the Issuing bank. Because the payment processor sets its own tiered rates, there can be hidden costs and fees can turn out to be unnecessarily expensive. So, it is important to be aware of the pricing and fees of each payment processor before making a decision.

 

More is better

Offering a variety of payment methods to customers means the merchant can better accommodate their different needs or preferences, which can ultimately result in more customers and more revenue. Imburse allows you to connect with any payment processor you want, so you have the freedom to partner with the ones that better fit your business’ needs and growth plans.

You also have the flexibility to add new payment processors easily and quickly, increasing your adaptability to customer and market changes. If you would like to know more about Imburse, please reach out to us via the contact button below. We will be happy to show you Imburse’s functionalities and what they can do for our business.

 

About Mariana Marques

Mariana is a content writer at Imburse, specialising in Finance and Technology topics.

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