What is a Payment Processor? Top 8 Payment Processors for Small Businesses

Napoleon

— 8 min read
What is a Payment Processor? Top 8 Payment Processors for Small Businesses

 As a business owner looking forward to ensuring a secure and consistent cash flow, one major concern that must be figured out is the approach and systems used in accepting payments. Payment processors are vendors or companies coupled with the task of helping businesses and their customers aid their electronic transactions, like sending and receiving payments. With them, businesses could efficiently and quickly receive payment for goods and services without delay.

While there are many payment processors, each offers varying features and distinct services that differentiate them from others. Your choice of payment processors would directly affect your business's financial transactions and effectiveness. As such, you need to be on the lookout when selecting one. In this guide, Foundeck provides the top 8 payment processors for small businesses. You will also get to understand the criteria to check when choosing one and a lot more.

What is a Payment Processor?

A payment processor is a service that aids the transfer of payments or funds from customers to businesses through the use of credit or debit cards, digital wallets, and so on. They facilitate the safe and secure payment for goods and services by the customer to the vendor or businesses. Not only that, many payment processors do offer business services like sales tracking, inventory and sales management, tax calculation and reporting, transaction reconciliation tools and so on. With the use of payment processors, businesses can bridge the gap between themselves and customers, allowing them to receive payments not only within their locale but also internationally.

What to look out for when choosing a Payment processor

The payment processor chosen for your business could directly influence your customer retention ability, conversion rates, customer satisfaction and experience, and so on. As such, you must understand your business needs and assess some vital factors before making your decision. Here are some of the things to look out for when choosing a payment processor.

Before selecting a payment processor, you should analyze and understand the charges and fees that are associated with their platform. Check out for the set-up, transaction, currency conversion, monthly subscription fees  and other charges. While some processors offer relatively low prices, you could find out that others offer a higher price with more features. Be sure to understand what each platform has to offer and compare it with their pricing. You might also find out that some offer a fixed flat rate while others charge per transaction made.

2. Available payment methods

Payment method is also important as it can gauge your customer conversion and retention rate. Be sure to select a payment processor that allows for multiple payment methods, especially the ones that are most favored by customers. You would want to check for credit and debit card payment options, availability of digital wallets and so on. Ensuring that you select a processor with a popular and variety of payment methods could increase your sales.

3. International payment processing

Not every payment processor allows international payment transactions. If your business serves or plans to expand its operations to other countries, then you must be sure to check this. Also, check the number of currencies and countries that are supported. You would also want to evaluate their currency conversion charges. 

4. Compatibility and integration

When selecting a payment processor, you would also want to check if it's compatible with your e-commerce store, app, website, POS system and so on. You would also want to be sure if it could be integrated with several APIs and plugins that allow for easy financial transactions and other services like tax calculation, customer relations, inventory and sales management etc that could be needed within your businesses.

5. Customer service support

For every payment processor that you select, customer service support is important. As such you would need to assess how effective their support service is. Are they quick in responding to users’ queries or does it take a longer time, will you be able to reach them via phone call, email, chat and so on? Are they available 24/7 to respond to you? By checking through past customer's reviews online, you would be able to evaluate this.

6. Ease of Use

You should also evaluate if the payment processor is easy to set up and navigate or if it requires the service of an expert to set up. Additionally, you would want to check the customer's experience on the platform. Be sure to check what previous customers have said about the platform as regards its usage ability. A good one generally should have an easy-to-use interface, should be efficient and user-friendly.

7. Security and Compliance

Security of the payment platform isn’t only important to businesses but also to customers. As such, you would want to ensure that the payment platform complies with industry standards and regulations and more so, it ensures that customer’s sensitive details are secured.  Apart from that, you would want to check if the platform has the ability to detect fraud and prevent it.

8. Scalability

As a new start-up you might not really require an advanced payment processor that offers several other services, but as your business continues to evolve, you might need them. As such, you would need to factor in the ability to scale up when choosing a payment processor. You should consider what your payment processing would be in the next two, five and ten years and select your processor accordingly. Would you need a payment processor with invoicing, tax calculation or analytics features in the future? All of these should be taken into consideration.

Top 8 Payment Processors for Small Business

Here are our top 8 payment processors for small businesses.

1. Stripe

Stripe is an extensive payment processor available mainly for online businesses. With its sophisticated API, Stripe allows businesses to integrate payment processors into their online store or website.

Apart from that, it allows multiple forms of payment including credit and debit cards and digital wallets. More importantly, Stripe does not require monthly charges, and this makes it more favored by small business owners who are on a low budget. As such the platform charges transaction fees which are based on the number of sales you make.

Notably, Stripe allows international payment and can transact with about 135 currencies. The platform also has useful extensions like sales analytics, tax reporting tools, inventory management tools and so on that make business easier.

Pros

  • Has no monthly charges and it is free to set up
  • Has a 24/7 customer service support
  • Accept about 135 currencies
  • Has a variety of extensions for business owners
  • Invoicing and billing options are available.

Cons

  • Setup and integration are quite complex and could require the expertise of a developer.

2. Square

Square isn’t only valuable to online businesses but is also useful to those with physical stores. As such it offers a variety of physical payment options including Point of Sale (POS) payment. Apart from that the platforms allow for integration which makes it possible to use business tools like sales and inventory management tools and so on.  At its basic level, Square doesn’t require a monthly fee however charges might be involved when using more advanced features in the platform. 

Pros

  • Has a point-of-sale system
  • There are several API integrations available
  • The platform doesn’t charge most major fees compared to other processor
  • Very affordable
  • Has free invoicing options 

Cons

  • Doesn’t offer 24/7 support at its basic level.

3. Paypal

PayPal is a popular payment processor among small business owners. It isn’t only available for online payment processing, but can be utilized for physical transactions. PayPal has varying payment methods, including debit and credit cards. The platform is well-known for its easy-to-use interface and its availability across several countries. Not only does it accept local payment, but also allows for international transactions using various currencies. 

Also, at its basic level, it doesn’t require a monthly subscription, but businesses are charged for every payment transaction done. As such, many businesses, including start up find it cheaper to use. It is not only suitable for businesses, but personal users can also open an account with them. As a business owner, you have the chance to utilize their invoicing features and merchant services when you open a business account with them.

Pros

  • Has a user-friendly interface
  • Generally easy to set up and use
  • Accept payments transactions among several countries
  • PayPal is a well-known and trusted brand

Cons

  • PayPal is known for withholding funds as such you must understand their rules and regulations properly

4. Payoneer

Payoneer offers payment processing not only to local business owners but also internationally. The platform features several country payment processing and generally allows payment with a variety of currencies. It is generally used by entrepreneurs, freelancers, and businesses globally.

Pros

  • Accept payment processing internationally
  • Generally easy to use and set up
  • Accept several currencies 
  • Has a range of customer service support.

Cons

  • Not suitable for in-person payments.

5. AmazonPay

AmazonPay doesn’t only allow businesses to process payment on their platform, but also allows business owners to process transactions across several websites, apps and platforms. It doesn’t charge a monthly fee, and this makes it valuable to small and large businesses. Most importantly, many customers sign up for this payment processor because of the trust, recognition and credibility associated with Amazon itself. Since the payment processor doesn’t charge a monthly fee, users are charged per each payment processed. 

Pros

  • Included in it is an extensive fraud protection system
  • Amazon is a popular and trusted brand among businesses and customers
  • Doesn’t charge a monthly fee

Cons

  • Offers fewer features and integrations

6. Melio

Melio payment processor is mainly used by small business owners, especially the B2B payments. The payment processor has an easy-to-navigate platform making it suitable for everyone. It also doesn’t charge a monthly fee and as such it is cheaper to use by start-ups. While it offers a fair percentage for credit card payments, ACH transfers are free on the platform. 

Pros

  • Has a free ACH transfer
  • Most suitable for B2B payments
  • Has an easy-to-navigate interface
  • Has an accounting software integration.

Cons

  • Offers only a few payment methods

7. Freshbooks

Freshbooks isn’t only a payment processor but serves as accounting software used by small businesses in tracking expenses and invoicing. It is a platform that doesn’t only helps businesses manage their financial transactions but also streamlines their payment processing. Freshbooks charges 15 dollars per month and as such it is relatively cheaper for most businesses.

Pros

  • Offers so many amazing accounting features
  • It is easy to set up and navigate
  • Help businesses manage their finances properly

Cons

  • Offers payment processing only at the basic level.

8. Clover

This payment processor offers a point-of-sale system in physical stores and is also suitable for online payment processing. It generally charges a flat rate for each transaction done through the platform. Beyond the debit and credit card processing, it also offers analytics and reporting tools, wireless processing, integrated merchant accounts and so on.

Pros

  • Offers a point-on-sale system
  • Have many integrations that help in inventory management, analytics, customer relations etc.
  • Suitable for physical and online payments.

Cons

  • Quite expensive

Importance of Using Payment Processors

Here are some of the importance of using payment processors

1. Enhance security

Payment processors help ensure that your customer's details are secured and as such reduce the chances of scams and frauds. With the use of several verification and authentication options, businesses and their customers are protected in the online and physical space.

2. Variety of payment options

With the use of payment processors, customers have the chance to choose the payment option that’s most convenient to them. This in return helps businesses ensure that they don’t lose customers due to payment options. Moreso it helps increase conversion and retention rates. 

3. Easy records and tracking

With a payment processor, it is easier to track every payment transaction within your business. As customers make payments, they are automatically recorded into your system. This alone serves as a record that can easily be referred to when needed.

4. International Transactions

Without a payment processor, it could be quite difficult to complete a business deal with partners and customers globally. Payment processors allow for easy transactions with people all over the world. So you don’t necessarily have to be in a location for you to make and receive payments.

5. Improves analytics and reporting

Some payment processors offer more advanced features that allow for reporting and analytics. With that, businesses could better understand their financial situation, monitor performance and spot any future issues, and so on. All of these could help a business enhance its efficiency and effectiveness.

Conclusion

While there are many payment processors out there, choosing the most effective and efficient one that meets your business needs is key. This guide therefore provided the top 8 payment processors for small businesses.

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