Cash Flow Solutions

3 Ways to Reduce the Stress of Small Business Payment Processing

A barista accepting payment from a customer with a credit card

Payment processing, especially for small businesses, can be a costly and complicated experience. In today’s market, accepting credit cards and mobile payments is essentially a requirement to be able to compete. But a lot of small business owners don’t even know where to start.

A simple Google search might reveal that your bank offers merchant services accounts, or maybe your friend mentioned a solution that worked well for their flower stand. At the end of the day, your small business is unique and requires a little more research.

Since the payment processing industry is a lot to take in, it’s easy to pick a solution out of convenience without doing your homework. For a lot of small business owners, this typically means long contracts, high rates and lackluster customer experience. Here are three ways to avoid some common pitfalls and get the perfect solution for your small business.

  1. Start with the basics – know your stuff.

There’s a lot going on in the world of payment processing. The jargon, parties involved and complicated percentages can get overwhelming for anyone. Here is a breakdown of some key terms, which is a great place to start before jumping on the phone with sales reps.

  • Merchant Services: This is a category of financial services that allow businesses to accept credit cards. Any business that wishes to accept a form of payment other than cash needs a merchant services account.


  • Independent Sales Organization: This is a third party company that is authorized by banks to handle merchant services accounts for businesses. Banks also offer their own merchant services, but often times you will experience more personalized customer support, lower rates and more advanced technology through ISOs.


  • Card Association: These are VISA, MasterCard, Discover and American Express and are considered governing bodies, not banks. They are responsible for such things as setting interchange rates, arbitrating between issuing and acquiring banks and maintaining and improving their card networks.


  • Interchange: Card associations charge interchange in exchange for a business to be able to accept their cards. This is considered the lowest possible cost of accepting cards, but since business owners never work directly with card associations, there are a number of ways that ISOs and banks charge on top of interchange for their services. It is important to note that every business owner pays interchange, no matter who you process with.
  1. Pick a pricing model that works for you.

Different processing vendors charge their merchants in different ways. Here’s a breakdown of the most popular three.

  • Markups: Markups can come in percentages or a flat rate, but the concept is the same across both: You’re paying a percentage on top of the interchange. This means that the more you process, the more you’re paying to your merchant services provider. Although this might be a good model for small volume businesses, as you grow, your processing bill will grow as well.


  • Tiered Rate: Tiered pricing has the potential to be the most expensive of the three listed here. The processing company will create three tiers: low qualified, mid-qualified and qualified. They will then assign a price to each of the tiers and certain cards you process will fall in certain tiers. Since there is no regulation, providers typically take the most popular cards and put them in the most expensive tiers, making processing on this model very expensive.


  • Subscription: On this model, a monthly membership is paid for access to the direct cost of interchange. This means that there is no variation based on how much you process. All you’re paying is your membership and the direct cost of the cards you’re running that month. Think of this model like Sam’s Club or Costco: You’re paying for access to the lowest cost. Even in the first month of processing on a subscription model, the savings can be significant.
  1. Remember: It’s more than just price.

Your bottom line is important, that’s a given. But when it comes to payments, you can’t afford to make your decision on price alone. There are a number of other factors that if chosen poorly can have a big impact on your small business. When evaluating a payments provider, take a holistic view of their offerings and consider the following before signing on the dotted line.

  • Technology: Do you have brick-and-mortar and online store? You probably don’t want to have to manage two different vendors for that. Go into your sales conversations with payment processing companies understanding what you need and exactly what they can offer. Your sales data can show you a lot about the health of your business and even give insights into operations needs (like staffing and inventory). Being able to see that all in one place – no matter how many different ways you accept payments – can make all the difference. Ask your provider whether they offer data analytics and reporting and evaluate how important that offering is to your business.


  • Customer Support: Payments are important. Period. If something happens and your team is not able to accept payments for purchases, your operation could come to a standstill. Although you might not be able to avoid the occasional crisis, you can control who you choose to have your back if there is one. Partnering with a payment provider who has in-house, dedicated support can make a world of difference, whether you have an emergency or just need a little help.

Tying it all together  

Choosing a payments partner is a tough decision, but going into the process with the knowledge and confidence to make an informed decision will make a huge impact on your buying process. Whether you are looking to switch, looking for your first processing experience or are even content with your current provider, take a look at these factors and really evaluate your payment processing needs to make sure you create the best experience for your business. At the end of the day, be sure to partner with a provider who will make your life easier, go easy on your wallet, and help your business grow.


Julia Olson is the Content Strategist for Fattmerchant, a payment technology company offering businesses affordable subscription-style pricing, data analytics technology, and dedicated customer support. Fattmerchant is the leader in creating a painless payment processing experience for all merchants, making it simple so that you can focus on what matters most – growing your business. Follow them on Facebook and Twitter @fattmerchant.

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