Payment Processing for Small Businesses

Getting paid. It’s a priority for every business, but when was the last time you thought about HOW you get paid?

As the use of cash to make purchases dwindles, it may be time for you to add other options for customers to pay you.

Think It Ain’t Broke? Think Again.

If your business is one of the archaic few only accepting cash from customers, you may think you’re not causing harm to your cash flow. Think again.

Consumers are moving more and more toward credit and debit card payments, as well as contactless payments. In fact, from 2019 (before the pandemic) to 2023, in-person contactless payments doubled and now account for 4.6% of in-person payments. That may not sound like much, but what would your bottom line look like if you added 4.6% more sales?

The more options you offer customers to pay, the more transactions and higher sales numbers you will see. Not everyone carries large amounts of cash these days, so if a shopper doesn’t have enough for a purchase in your store, you may lose out on the sale. On the other hand, if a shopper can pay with a card or even their phone or watch, they may be more likely to make the purchase.

Convinced you need to step up your payment game? Let’s explore your options.

Card Payments

Credit and debit card payment devices are ubiquitous these days. Customers can swipe or tap their card on the device at checkout, and their accounts are automatically charged.

If you sell products online, you’ll need to accept card payments. You can use online merchant processing tools like Stripe as well as PayPal.

Pros: Accepting debit and credit cards expands payment options for customers, and you can increase sales.

Cons: You, as the business, are charged fees from the merchant processing company, with an average of 2.24% per transaction. Some cards, such as American Express, charge even higher than average fees.

Mobile and Contactless Payments

As I said, we’re seeing an increase in contactless payments, which is why you might want to get on board, or you risk shoppers giving their hard-earned money to your competitors. Today, not only can people tap their phone to your payment terminal if they use financial payment apps like Apple Pay or Google Pay, but they can also tap their smartwatches to pay. 

Pros: Again, the more options customers have, the more money you make.

Cons: Because there are higher fees when payments are made without the physical card present, you may pay more per transaction for mobile payments.

Peer-to-Peer Payments

Depending on what kind of business you have, you may also be able to accept peer-to-peer payments (P2P) through platforms including PayPal, Venmo, and Zelle.

To complete a purchase, a customer simply sends a digital payment from their P2P account to yours. In most cases, the money arrives instantly in your account.

Pros: You don’t need to buy any hardware (other than your smartphone) or sign up for any contracts.

Cons: While many consumers have one or more of these P2P apps, not all do, so you may encounter customers who can’t pay without signing up.

Choosing the Right Payment Processing for Your Business

With all these options, where do you begin? Start by considering which payment solutions best fit your business. 

If you sell products at a farmer’s market on the weekends, you don’t want to carry around clunky payment processing equipment. You might instead look at P2P or a mobile payment card processing tool like Square.

If your sales are online, you can use online payment platforms and/or P2P. The more, the merrier.

If you want to offer multiple payment options, look for a platform that can provide both the physical hardware to process card payments and online payment tools to simplify your work in setting everything up.

Research Options

When it comes to merchant processing companies, you can likely find one in your area that will get you set up. If you’re more of a DIY kind of person, look at Square or Stripe, which also offer online payment processing. For P2P payments, your primary options are PayPal, Zelle, and Venmo.

Explore Costs

Next, research the fees. Some platforms charge one fee if you swipe the card and another if the customer uses a mobile app or watch to pay and the card isn’t present. Keep in mind that there may be several different fees, including an interchange fee, payment processor fee, and assessment fee. Expect to pay 1.5-3.5% per transaction.

If you need hardware, you’ll have to pay for that. Some companies offer the equipment and maintenance as a subscription and charge $50 to $250 a month.

Consider how much these fees and subscriptions will eat into your profits. You might consider raising your prices to compensate or having a minimum purchase amount for credit or debit card transactions.

Explore Payment Processing Options

Once you understand the features you need as well as the pricing for the services you’re considering, dive deeper. Look for reviews for the company you’re considering, especially as they relate to customer service. You want to be assured of a fast response if you have an issue processing a payment.

Talk to other small business owners to see if they have experience with a particular company and can make a recommendation.

Consider how long you’re willing to be “locked in,” as some payment processing companies will want to establish a contract with you. What happens if the service doesn’t meet your needs halfway through the contract? Will you have to pay a termination fee?

Once You’ve Chosen

If you have staff, make sure to train them on how to use the point-of-sale system to process payments.  If you have inventory software, connect your new payment processing system to your inventory system so that every time you make a sale, your inventory numbers reflect it.

Many payment processors offer online education resources. Take advantage of them so that you get the most out of your software and services.

It may take a while to adjust to your new processes, but after a few months, you’ll be able to see just how much your revenues increased as a result of expanding the number of options that customers have to make a purchase!