1. Be aware of fee structure
Fee structures for payments platforms vary quite a bit across the industry. At the end of the day, you want to maximize your cash flow. That being said, picking the right fee structure is one of the most important aspects of choosing the right platform.
First off, you should be aware of the various types of fees that are most common:
• Transactional fees: These are fees assessed every time you run a transaction. The industry standard is 2.9 percent plus $0.30 per transaction.
• Interchange fees: These are fees charged by the issuing banks (Visa, MasterCard, etc.). These fees are often included in the transactional fees as the platform's "Markup." Sometimes the platform will charge a separate interchange fee to the merchants.
• Annual/Monthly fees: These are fees charged on a monthly or annual basis typically on top of transactional fees.
• Batch fee: Your credit card transactions will be deposited into your bank account in "batches." Platform's may charge a small fee for each batch.
• Chargeback fee: In the event of a chargeback, the platform may pass the fee onto the merchant.
• Hidden/Penalty fees: Hidden fees are any fees that are not "advertised" to the merchant. Be very careful of these, because they can be seriously detrimental to your cash flow.
• For example: Some platforms have transaction maximums per month. If you go over the maximum, you will be charged a fee. The platform may not "advertise" this penalty.
With all these fees to choose from, platforms will often provide a mix in their offerings. Some platforms offer tiered pricing structures, where you can essentially pay for more features as you scale your business.
Some financial institutions offer a flat rate regardless of feature set or volume. If you carefully assess what your business needs and take your time in identifying a fee structure that meets your requirements, you'll surely find the right solution.
2. Ensure most major payment types are accepted
Acceptance policies range quite a bit across platforms as well. Odds are you wont be able to accept every single payment type available. However, you'll want to make sure you can accept the major ones. The card types that are arguably necessary are Visa, MasterCard, Discover and American Express. To get an understanding on how often these cards are used, you can reference credit card statistics and reports on the Credit Card Forum. Here are the basic stats:
• Visa: Total purchase volume of $1.412 trillion in the 12 months ending June 30, 2016.
• MasterCard: Total purchase volume on U.S. credit cards was $653 billion in 2015.
• AMEX: Total purchase volume on U.S. credit cards was $721 billion in 2015.
• Discover: Discover's total U.S. credit card purchase volume was $135 billion in 2015.
Just by looking at the sheer volume of each of these card types, you'd be doing yourself a huge injustice by leaving one out.
Some payment platforms may offer "card packages" where they may charge extra to accept different card types. For example, American Express interchange rates tend to be the most expensive. Because of this you'll see businesses, often brick and mortar, decline to accept American Express.
Since online transaction volumes tend to be exponentially higher than in-store, you'll most likely want to accept American Express right off the bat. Enough platforms out there offer all four major card types, so avoid any that don't.
3. Make sure the software is efficient
Each payment platform will most likely offer a different "payment experience" based on their technology. A huge part of this has to do with the user checkout experience. According to Business Insider, about 46 percent of payments are cancelled on the payments page. The only way to decrease that statistic is to optimize your payment experience. Again, it's difficult to find a platform with every option available however it's important to make a selection based on your specific needs. Here's what to look for when comparing technological capability between payment platforms:
• User Checkout Experience (UX): The less steps your customer needs to complete their payment the better. If you're choosing a payment platform to integrate into your online store, this is very important. Some platform's offer one-click checkout's which allows you to save customer information for future purchases.
• Integration: Ideally, you should be able to use a plug-in to integrate with your online store. For example: WooCommerce provides a plug-in that allows you to easily integrate various payment gateways into your online store. Aside from plug-ins, review any API documentation available with your dev team to scope out the logistics.
• Growth: As your business grows, you're going to need your payment platform to keep up. Make sure your platform can efficiently scale with your business, otherwise you may be in big trouble.
• Depending on the integration, your development team should be able to quickly tell you whether or not the platform is scalable or not.
4. Inquire about payment turnarounds
As a business owner, you'll typically want to see money deposited into your bank account as quickly as possible. Turnaround times vary between payment platforms.
After a few successful transactions, your payment provider will settle the money in your bank account in a batch. The batches are usually broken up depending on what time each transaction was completed.
A platform will provide a settlement batch cut off time as well as a deposit schedule.
For example: Platform A has a settlement batch cut off time between 5AM-6PM (EST) and deposit schedule of 2-3 business days.
Any batch settled in between the batch time will be deposited within 2-3 business days. Any transaction completed after the cut off time will be pushed back a day, this often times causes confusion and frustration among businesses who aren't aware of these rules.
In addition to settlement cut off times and deposit schedules, there may be other holds that can delay your deposits.
Ideally, you should be able to find a service that provides next day funding with a limited amount of potential funding holds. Make sure to inquire about these various rules before making your choice.
5. Ask about contracts
Not all payment platforms will require a signed contract, but for those that do you'll definitely want to take a look. If you can, have your legal council review the contract for you. If you can't utilize a lawyer, here are some things to look for in the contract.
• Fees: Use what you learned from the fee section above. All hidden fees and penalties will be clearly stated in the contract. You probably won't find these advertised on the platform's website, so make sure you have a crystal clear understanding from reading the contract.
• Licenses: Make sure you're compliant with all rules regarding licenses and trademarks. For example, some platforms may require you to include logo's in your checkout flow. If you want a white-labeled payment solution, you'll have to find a platform that allows for it. Some platforms, like PayPal, will make you redirect to their website for payment.
• Data collection: If you're planning on collecting user data, make sure you're aligned with your platform's data collection regulations.
If your payment platform asks to have a contract signed, it's definitely in your best interest to review it with your legal council.
If you aren't well versed in law, odds are you'll miss a detail that may be a potential deal breaker. It's always better to be safe than sorry.
6. International payments
You'll need to really think ahead on this one. Processing payments overseas is no easy task. Even if it's not on your immediate roadmap you'll probably want to go with a payment provider who can handle international payments.
Here are some things to keep in mind when inquiring about accepting cross-border payments:
• Fees: Processing payments in new markets means new costs and fees. Often times payment platform's push these fees onto their customers, that means you. Make sure you're aware of all hidden costs and fees associated with each transaction.
• Exchange rates: A payment platform may claim to be "commission" free for bank settlements in different currencies, but in reality they are just loading the exchange rate.
• Make sure you're getting a fair rate when you are settling from different currencies. Exchange rates on transfers are calculated using the following:
• Amount transferred
• Time-frames you're working to
• Currencies involved
• Exchange rate levels at time of purchase
• Security: Regulations around credit card transactions in the United States differ from those in Europe. You need to make sure you are compliant in all markets.
• Double check with the platform to make sure they meet all compliance and security measures in each country.
Whether you're looking to accept payments in different currencies or open up shop in Hong Kong, make sure you have a good understanding of the international payment capabilities of your prospective platform.
Finding the customers overseas is just the first step. Finding a cheap and convenient way for them to pay you is the hard part.
Unfortunately, there isn't a universal payment platform that operates in every country. However, there are plenty of platforms that can securely process payments overseas.
7. Support
Depending on the size of your business you'll need to assess the level of support you require to operate efficiently. Whether its a 24/7 chat service, email form or FAQ section, you should look for a platform that provides a thorough and responsive support channel. Whenever money's involved, people lose patience very quickly. Yet, you will earn your customer's respect and loyalty if you give them the support they need.
If you're located in the U.S. and you have a customer halfway around the world complaining about a duplicate charge, you'll want to assist them ASAP. The amount of time it takes you to correct the charge will make or break the customer experience.
Chargeback support is a huge area to inquire about as well. A chargeback will occur when a customer disputes a purchase that has been made.
Some payment platforms will serve as a mediator in the negotiation while others will automatically credit back the customer without any investigation, the latter can seriously hurt your cash flow.
Make sure you fully inquire about chargeback support with any prospective platform. In addition to hindering cash flow, chargebacks are terrible for your reputation. Make sure they're handled properly as they come in.
8. Security
The security regulations and procedures involved with payments are no joke. That being said, make sure you you're fully aware of all responsibilities, liabilities and protections.
First and foremost, you'll want to choose a platform that is fully PCI (Payment Card Industry) compliant. This basically means the platform has been vetted by a third party and is up to date with industry regulations and standards, learn more on the official PCI Security Standards Council website.
Ironically, compliance is enforced by credit card issuing companies like Visa, MasterCard and Discover. These are the four levels of PCI compliance as mandated by Visa and MasterCard. The definitions are according to annual credit card volumes:
• PCI Compliance Level: Over 6 million Visa and or Mastercard transactions processed annually.
• PCI Compliance Level 2: 1 million to 6 million Visa and or Mastercard transactions processed annually.
• PCI Compliance Level 3: 20,000 to 1 million Visa and or Mastercard e-commerce transactions processed annually.
• PCI Compliance Level 4: Less than 20,000 Visa and or Mastercard e-commerce transactions processed annually all other companies that process up to 1 million Visa transactions annually.
Make sure the payment platform is compliant up to your businesses transactional volumes. In addition to PCI compliance you'll want to make sure your customer's data is kept secure.
Inquire about where customer data is stored. Make sure customer data is encrypted and secure, preferably on a third party server. You can use higher security measures to your advantage by advertising it during your checkout.
By ensuring customer data is kept secure, they'll be more confident in finishing the transaction and eventually returning to your online store.
• For example: Some platforms have transaction maximums per month. If you go over the maximum, you will be charged a fee. The platform may not "advertise" this penalty.
• Amount transferred
• Time-frames you're working to
• Currencies involved
• Exchange rate levels at time of purchase
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