Finding the best payment processing for small business can be a game-changer. Whether you’re a brick-and-mortar shop or an online retailer, the right payment processor can streamline your operations, enhance customer satisfaction, and ultimately boost your bottom line by accepting in-store and online credit card payments. But with so many options available, how do you choose the right one?
Our comprehensive guide offers a straightforward evaluation of the leading payment processing providers. We break down the essential aspects, such as fees, user-friendliness, and the advantages and disadvantages, to help you make an informed decision that aligns perfectly with your business needs.
Table of Contents
- Understanding the Best Payment Processing for Small Businesses
- Evaluating Costs and Fees
- Our Top Picks: The Best Payment Processing Providers for Small Businesses
- Tips for Choosing the Right Payment Processor
- Summary
- Frequently Asked Questions
Understanding the Best Payment Processing for Small Businesses
At its core, payment processing is the management of financial transactions, specifically credit card and debit card payments. The process is facilitated by payment processors, which establish connections between merchants, banks, card networks, and other entities to enable secure and effective payment transactions. From the moment a customer swipes, inserts, or taps their card to the moment the funds reach your bank account, the payment processor is hard at work, ensuring a seamless transaction.
As the backbone of commerce, payment processors support businesses of all sizes to accommodate their customers’ payment preferences. To maintain their competitive edge, businesses must have a robust payment processing system in the current highly competitive landscape.
The role of payment processors
Payment processors bridge the gap between businesses and customers, facilitating transactions by transferring funds from the customer’s bank or credit card account to the merchant’s account. But that’s not all they do. Payment processors also equip businesses with various sales tracking and transaction reconciliation reporting tools. This is particularly advantageous for businesses that accept debit cards, allowing them to cater to a broader range of customers and their preferred payment methods.
In addition to facilitating transactions, payment processors also play a crucial role in:
- Protecting businesses from fraud
- Implementing robust security measures, such as Address Verification Service (AVS) and Card Verification Value (CVV), to safeguard against financial losses and chargebacks, particularly in online credit card processing where the risk of fraud is higher
- Assisting small businesses in setting up the necessary merchant accounts required for holding funds from debit and credit card sales.
Types of payment methods
Businesses have a wide array of payment methods at their disposal. With the increasing consumer demand for contactless payments, businesses must adapt to cater to this need. Some popular choices include:
- Direct debit
- Card payments
- Digital wallets
- Online payment gateways
Payment terminals or point-of-sale (POS) systems facilitate in-person payment processing. These devices allow customers to swipe, insert, or use contactless technology with payment cards. The transactions are securely processed, and the funds are deposited into the business’s account, making it easy to accept credit cards and ensuring a seamless process.
Online payment processing, on the other hand, requires technology such as cloud-based POS systems and global payment platforms. These solutions enable businesses to accept online and in-person credit card payments, catering to a broader range of customers.
Evaluating Costs and Fees
Any small business must comprehend the costs and fees of credit card processors and payment processing. With a range of 1.5% to 3.5% per transaction, these fees can notably impact your profitability. Given the disparity in transaction fees among payment processors, evaluating your options thoroughly is vital. Moreover, setup fees can also vary, with some providers imposing a per-transaction fee ranging from 0.18% plus 10 cents to 0.50% plus 10 cents. In contrast, others may apply a fixed monthly fee for account maintenance and customer support services.
Effectively evaluating costs and fees hinges on comprehending your business’s unique needs and the influence of various pricing models on your profitability. Whether you’re processing a high volume of transactions or just a few, selecting the right payment processor can significantly affect your bottom line.
Transaction fees
Transaction fees, which vary between 1.5% and 3.5%, play a significant role in payment processing. These fees are influenced by factors such as:
- the type of company involved
- the type of card used in the transaction
- the method of transaction
- the level of risk associated with the transaction
- the pricing model utilized
Typically, these fees are determined as a percentage of the total transaction amount. For instance, a 3% processing fee would be computed by multiplying the total transaction amount by 0.03.
It’s worth noting that transaction fees can vary depending on the type of card used in payment processing. Credit card processing fees, for example, range between 1.5% and 3.5%. The precise fee arrangement is contingent upon the specific type of card utilized.
Monthly and setup fees
In addition to transaction fees, businesses should also account for the following fees:
- Monthly fees, which can include terminal lease fees and application subscription fees
- Setup fees, which may be one-time fees for wireless payment processing
- Monthly wireless service fees
These fees contribute to the total cost of payment processing for a business.
When calculating setup fees, payment processors consider various factors, such as transaction fees, assessment fees, and the effective rate, derived from dividing the total credit card processing fees by the amount processed. Additionally, different card networks influence setup costs with their respective fee structures.
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Our Top Picks: The Best Payment Processing Providers for Small Businesses
Choosing the best payment processing for small businesses is crucial to ensure smooth transactions and maintain customer satisfaction. Several payment processing providers stand out due to their unique features, pricing, and suitability for different types of businesses. Here’s a detailed ranking of the top 10 payment processing providers, from top 10 to top 1:
10. Thryv
Thryv offers an all-in-one business management platform that includes payment processing and tools like CRM and marketing automation. This makes it a comprehensive solution for small businesses looking to streamline their operations.
Thryv charges a monthly fee starting at $199. While this is higher than many standalone payment processors, it includes access to a wide range of business management tools, which can provide significant value for businesses looking to consolidate their operations.
- Pricing Type – Transaction fees vary based on the payment processor integrated with Thryv. Thryv helps businesses find the best rates and integrates with various payment processors to provide flexible options.
- Account Type – It integrates with existing merchant accounts, allowing businesses to continue using their preferred payment processor while benefiting from Thryv’s additional features.
Advantages and Disadvantages
One of Thryv’s main advantages is its all-in-one solution. By combining payment processing with CRM, marketing automation, and other business tools, Thryv helps businesses streamline their operations and improve efficiency. The platform also offers comprehensive customer support, ensuring businesses can get assistance when needed.
However, Thryv’s higher monthly fees can be a drawback for small businesses with limited budgets. Additionally, the platform’s complexity may be more than what some businesses need if they only look for payment processing solutions.
9. Swipesum
Swipesum is a payment consulting service that helps businesses find the best payment processing solutions tailored to their needs. Rather than being a direct payment processor, Swipesum analyzes businesses’ payment processing requirements and recommends the most suitable providers.
Swipesum does not charge a monthly fee for its consulting services. Instead, it earns revenue through partnerships with payment processors, making its services accessible to businesses without upfront costs.
- Pricing Type – Pricing varies based on the payment processor chosen through Swipesum’s recommendations. Swipesum helps businesses negotiate the best rates with their chosen provider, potentially leading to significant cost savings.
- Account Type – It assists in setting up the most suitable merchant account based on the business’s specific needs. This personalized approach ensures that businesses get the best solution for their payment processing requirements.
Advantages and Disadvantages
One of Swipesum’s main advantages is its expert advice. By analyzing a business’s payment processing needs and comparing different providers, Swipesum can help businesses find the most cost-effective and efficient solutions. This can lead to significant cost savings and improved payment processing performance. Additionally, Swipesum provides a comprehensive analysis of different processors, helping businesses make informed decisions.
However, Swipesum is not a direct payment processor, meaning businesses will still need to work with a separate provider for payment processing needs. Additionally, there is a potential for bias in Swipesum’s recommendations, as it may favor specific processors with which it has partnerships.
8. Venmo for Business
Venmo for Business allows small businesses to accept payments via the popular Venmo app, making transactions easy and social. It is particularly popular among younger demographics already familiar with the Venmo platform.
Venmo for Business does not charge a monthly fee, making it accessible to small businesses that want to avoid recurring costs.
- Pricing Type – Venmo charges 1.9% + $0.10 per transaction. This fee structure is competitive, especially for businesses that process a high volume of smaller transactions.
- Account Type – Venmo for Business accounts are linked to the business’s bank account, allowing for easy transfers and management of funds.
Advantages and Disadvantages
One of the main advantages of Venmo for Business is its popularity among millennials and younger consumers. The social integration feature allows payments to be shared socially, increasing visibility and potentially attracting more customers. Additionally, Venmo’s low transaction fees make it an affordable option for small businesses.
However, Venmo for Business has some limitations. It offers basic payment processing features without advanced tools that some businesses may require. Additionally, Venmo is often seen as less professional than other payment processors, which could impact the business’s brand perception.
7. Melio
Melio is designed to manage payments and cash flow for small businesses, mainly focusing on B2B payments. It offers a simple and intuitive platform for making and receiving payments. Melio does not charge a monthly fee, making it a cost-effective option for small businesses.
- Pricing Type – Melio charges a 2.9% fee for credit card payments, but ACH transfers are free. This pricing structure is beneficial for businesses that prefer to use bank transfers.
- Account Type – It integrates with business bank accounts, allowing for easy management of payments and cash flow.
Advantages and Disadvantages
One of the main advantages of Melio is its free ACH transfers, which can significantly reduce costs for businesses that primarily use bank transfers. Melio’s focus on B2B payments makes it an ideal solution for businesses managing supplier payments and other expenses. The platform’s ease of use and intuitive interface make it accessible for small businesses without extensive technical knowledge.
However, Melio’s credit card fees are higher than other payment processors, which could be a drawback for businesses that frequently use credit card payments. Additionally, Melio primarily supports bank transfers and credit cards, offering fewer payment methods than more comprehensive payment processors.
6. HoneyBook
HoneyBook is a client management platform with payment processing, project management, and invoicing tools. It is designed to help small businesses and freelancers manage their client relationships and streamline their operations. HoneyBook charges a monthly fee starting at $9, making it an affordable option for small businesses and freelancers.
- Pricing Type – HoneyBook charges a 3% fee for credit card transactions and 1.5% for ACH transfers. While the credit card fees are slightly higher, the platform’s additional features can provide significant value.
- Account Type – It integrates with business bank accounts, allowing for easy management of payments and client accounts.
Advantages and Disadvantages
One of HoneyBook’s main advantages is its all-in-one toolset. HoneyBook helps businesses streamline operations and improve efficiency by combining payment processing with project management and invoicing. The platform’s low monthly fees make it accessible to small businesses and freelancers. HoneyBook’s client management features can help businesses build and maintain strong client relationships.
However, HoneyBook’s transaction fees are higher than other payment processors, particularly for credit card payments. Additionally, the platform’s comprehensive features may have a learning curve, requiring time to fully utilize all the tools effectively.
5. Amazon Pay for Business
Amazon Pay allows customers to use their Amazon accounts to make purchases on other websites, providing a familiar and trusted checkout experience. This can be particularly beneficial for businesses leveraging Amazon’s brand recognition and customer trust. Amazon Pay does not charge a monthly fee, making it an accessible option for businesses of all sizes.
- Pricing Type – Amazon Pay charges 2.9% + $0.30 per transaction for domestic payments. This pricing is competitive with other major payment processors, making it a viable option for businesses offering a seamless checkout experience.
- Account Type – It integrates with existing merchant accounts, allowing businesses to add Amazon Pay as an additional payment option without setting up a separate account.
Advantages and Disadvantages
One of Amazon Pay’s main advantages is its trusted brand. Customers are familiar with Amazon and often feel more comfortable completing transactions using their Amazon accounts, which can lead to higher conversion rates and increased sales. Additionally, Amazon Pay provides robust fraud protection and security features, helping to safeguard both businesses and customers.
However, Amazon Pay has some limitations. It offers fewer features than dedicated payment processors, which may not meet the needs of businesses looking for more comprehensive solutions. Additionally, Amazon Pay primarily benefits customers with Amazon accounts, which could limit its appeal to a broader audience.
4. FreshBooks
FreshBooks is cloud-based accounting software that includes payment processing, invoicing, and expense tracking. It is designed to help small businesses manage their finances and streamline their accounting processes. The monthly fee starts at $15, making it an affordable option for small businesses.
- Pricing Type – FreshBooks charges 2.9% + $0.30 per transaction for credit cards. This fee structure is competitive and straightforward, making it easy for businesses to understand costs.
- Account Type – It integrates with business bank accounts, allowing for easy management of payments and accounting.
Advantages and Disadvantages
One of the main advantages of FreshBooks is its comprehensive accounting features. By combining payment processing with invoicing and expense tracking, FreshBooks helps businesses manage their finances more effectively. The platform’s user-friendly interface makes it easy to set up and use, even for those with limited accounting knowledge. Additionally, FreshBooks offers professional invoicing features, which can help businesses maintain a professional image.
However, FreshBooks’ monthly fees are higher than some standalone payment processors, which could be a drawback for businesses with limited budgets. Additionally, FreshBooks’ primary focus is on accounting, which means its payment processing features might not be as robust as those offered by dedicated payment processors. Businesses that require advanced payment processing capabilities may need to supplement FreshBooks with additional tools.
3. PayPal
PayPal is a widely recognized payment processor supporting online and in-person transactions. Known for its ease of use and widespread acceptance, PayPal allows businesses to accept payments through various methods, including credit cards, debit cards, and PayPal balances. Its extensive reach and user-friendly interface make it popular among small businesses.
PayPal does not charge a monthly fee for its basic service, making it accessible for businesses of all sizes. This pay-as-you-go model ensures that businesses only incur costs when they process transactions, reducing the financial burden on startups and small enterprises.
- Pricing Type – PayPal charges 2.9% + $0.30 per transaction for online payments. While this fee is competitive, businesses need to consider the cumulative cost of these transaction fees, especially if they process a high volume of small transactions.
- Account Type – It offers both personal and business accounts. Business accounts come with additional features such as invoicing, recurring billing, and access to PayPal’s merchant services, which are designed to meet the needs of small to medium-sized businesses.
Advantages and Disadvantages
One of PayPal’s most significant advantages is its ease of use. Setting up a PayPal account is straightforward, and the platform’s user-friendly interface makes it easy to manage transactions. PayPal is also a trusted brand, which can enhance customer confidence and potentially increase sales. Its versatility allows businesses to accept various payment methods, catering to diverse customer preferences.
Despite its advantages, PayPal has some drawbacks. Its transaction fees are higher than other payment processors, which can add up, especially for businesses with high transaction volumes. Additionally, PayPal is known for occasionally placing holds on funds or freezing accounts, which can disrupt cash flow and business operations.
2. Square
Square is popular for small businesses, particularly those with physical locations. It offers a range of hardware options for in-person payments, including card readers and point-of-sale (POS) systems. Square is designed to be an all-in-one solution, combining payment processing with inventory management, sales reporting, and other business tools.
Square does not charge a monthly fee for its basic service, which includes access to its POS software and basic payment processing features. This makes it an affordable option for small businesses that want to avoid recurring costs.
- Pricing Type – Square charges 2.6% + $0.10 per in-person transaction and 2.9% + $0.30 for online transactions. This transparent pricing model helps businesses understand their costs upfront and plan accordingly.
- Account Type – It provides a merchant account with integrated POS systems. This integration allows businesses to manage their sales, inventory, and customer data from a single platform, streamlining operations and improving efficiency.
Advantages and Disadvantages
Square’s all-in-one solution is one of its biggest advantages. It includes POS hardware and software, simplifying setup and management of in-person payments. Square’s user-friendly interface makes it easy to use, even for those with limited technical knowledge. Additionally, Square offers no monthly fees and a pay-as-you-go pricing model, which can benefit small businesses with variable sales volumes.
However, Square has some limitations. Its customization options are limited, which may not meet the needs of businesses looking for more advanced or tailored solutions. Additionally, while Square’s fees for in-person transactions are competitive, its fees for online transactions are slightly higher, which could be a consideration for businesses with significant online sales.
1. Stripe
Stripe is a robust payment processing platform designed primarily for online businesses. It supports various payment methods, including credit cards, debit cards, and digital wallets. Stripe’s powerful API allows developers to integrate payment processing into their websites or mobile apps seamlessly. This makes it highly customizable and suitable for businesses with specific needs or those looking to create a tailored customer payment experience.
Stripe does not charge a monthly fee, which makes it an attractive option for small businesses that want to avoid fixed costs. Instead, its pricing is based on transaction fees, which means you only pay when you make sales.
- Pricing Type – Stripe charges a transaction fee of 2.9% + $0.30 per successful card charge. This fee structure is straightforward and easy to understand, making it easier for businesses to predict costs.
- Account Type – It offers a merchant account with extensive API integration capabilities. This allows businesses to directly manage transactions, refunds, and other payment-related activities through the Stripe dashboard or custom-built applications.
Advantages and Disadvantages
One of the main advantages of Stripe is its global reach, allowing businesses to accept payments from customers worldwide. This is particularly beneficial for online businesses that serve international markets. Stripe is also highly developer-friendly, offering extensive API documentation and tools that enable custom integrations. Additionally, Stripe includes advanced features such as subscription billing, invoicing, and fraud prevention, making it a comprehensive solution for businesses looking to scale.
However, Stripe’s complexity can be a disadvantage for some small businesses, especially those who need more technical expertise. The setup and integration process may require developer assistance, which could increase initial costs. Stripe’s support is primarily through email and chat, with limited phone support, which might not be ideal for businesses that prefer immediate, direct assistance.
Tips for Choosing the Right Payment Processor
With a grasp of the top payment processing providers, the subsequent step is selecting the one best suited for your business. But how do you make this crucial decision? It all boils down to assessing your business needs, comparing pricing models, and prioritizing customer support. Remember, the goal is to ensure a seamless payment experience for your customers, and this can only be achieved by choosing a processor that aligns with your business needs and goals.
Selecting the appropriate payment processor requires careful consideration. It’s a strategic move that can significantly impact your business operations and customer satisfaction. Therefore, it’s essential to evaluate your options thoroughly.
Assessing your business needs
The initial step in choosing the right payment processor involves assessing your business needs. Consider factors such as your transaction volume and average transaction size. For businesses with low transaction volumes, a pay face might be the preferred option due to its simpler pricing models and faster onboarding. Conversely, high-volume businesses may find processors with lower transaction fees more beneficial.
The average transaction size also plays a significant role in selecting a payment processor. It can affect the fees and pricing structure provided by the processor. Furthermore, the nature of the products or services sold may also impact the choice of a payment processor.
Understanding your business needs is critical to making an informed decision. By identifying your specific requirements and aligning them with the offerings of different payment processors, you can significantly narrow down your options and make a choice that best suits your business.
Comparing pricing models
Subsequently, it is crucial to compare the pricing models of various payment processors. There are three common types: interchange-plus, flat-rate, and tiered pricing. Interchange-plus pricing comprises two elements: the interchange fee established by the card network and the markup determined by the credit card processor. This model is typically more cost-effective than other pricing models like tiered or enhanced recovery reduction (ERR).
On the other hand, tiered pricing is a model merchant service providers use to categorize similar credit and debit card transactions into different tiers. The rate for each tier and the transactions that qualify for each tier are determined by the providers. Understanding these pricing models lets you determine the most cost-effective for your business.
Prioritizing customer support
Finally, considering the quality of customer support is crucial when selecting a payment processor. In a technical glitch or a transaction dispute, having a responsive and accessible customer support team can make a world of difference. Consequently, selecting a payment processor that offers round-the-clock support through various channels, such as phone, email, and social media, is crucial.
Customer support is not just about resolving issues; it’s about enhancing the overall customer experience. Effective customer support can:
- Save time and money
- Enable a heightened focus on business operations
- Enhance the credibility and reputation of the business through faster and more secure transactions.
Summary
Choosing the right payment processor is a critical step in the growth and success of your small business. By understanding the intricacies of payment processing, evaluating costs and fees, and comparing the offerings of top providers, you can make an informed decision that aligns with your business goals. Remember, the right payment processor is a service provider and a partner in your success. So, take the time to make this strategic decision and pave the way for a seamless payment experience for your customers.
Frequently Asked Questions
What payment method is good for small business?
Offering affordable ACH or eCheck options, accepting card payments, and enabling direct debit payments can be good payment methods for small businesses. These methods can help broaden their customer base, legitimize their company, and improve their cash flow.
How do I set up payment processing for my small business?
To set up payment processing for your small business, you need to choose a payment gateway, set up a merchant account, and find a credit card processor that suits your needs. It involves finding a credit card processing provider, opening a merchant account, and setting up payment terminals.
Which payment processor is best?
Stripe is a popular choice for SMBs due to its efficient credit card processing, while Square is recommended for in-person transactions. Payline Data is considered the best option for high-risk sectors. Ultimately, the best payment processor depends on your specific business needs.
What is payment processing, and why is it essential for small businesses?
Payment processing is crucial for small businesses as it allows them to accommodate their customers’ payment preferences, improve the overall shopping experience, and facilitate secure and efficient transactions.
What are the key responsibilities of payment processors?
Payment processors’ key responsibilities include facilitating transactions, transferring funds, providing reporting tools, protecting against fraud, and assisting in setting up merchant accounts. These responsibilities are crucial for ensuring smooth financial transactions and business security.
