Payment processors facilitate every online transaction. When setting up or expanding your online store, choosing a suitable payment processor is one of your most important payment-related business decisions.
However, with so many providers on the market offering different packages, fees, and features, you need to consider these eight essential factors when choosing the best payment processor for your online store.
What Is A Payment Processor?
A payment processor is a third-party provider that helps retailers accept online payments by managing the transactions between retailers, customers, and financial institutions.
Payment processing occurs after a customer has purchased a business’s goods or services with a credit or debit card or another form of electronic payment. This process transfers funds from the customer’s bank account to the business’s bank account.
There are two types of payment processing, including:
- Direct payment processing allows businesses to handle payment processing in-house using a payment gateway and processor.
- Intermediated payment processing uses an external payment processor and gateway to facilitate online transactions.
Payment processors don’t just handle transactions, they also impact the customer experience. If a consumer is unable to complete their online purchase due to unsupported payment methods or transaction failures, that could lead to a lost sale and a lost customer.
8 Essential Factors To Consider When Choosing A Payment Processor For Your Online Store
Payment processing is essential in today’s competitive eCommerce world. It streamlines and simplifies the payment process for businesses and consumers, making it easy and convenient to purchase online.
Understanding these eight essential factors will help business owners make informed decisions about their preferred provider.
Security
A data breach costs UK businesses an average of £2.93 million each year. Your chosen payment processor must ensure a high level of security for your customers and your business reputation.
Look for a payment processor that prioritises security measures such as end-to-end encryption, chargeback protection, and fraud detection.
You’ll also want to ensure that the provider complies with the policies and procedures set by the
Payment Card Industry Data Security Standard (PCI DSS). These standards optimise the security of online transactions and protect cardholders against the misuse of their personal information.
Pricing and fees
Another thing you should consider when choosing a payment processor is the pricing structure and card processing fees.
Card processing fees are a small percentage of the total transaction amount, typically ranging from 1% to 5%. In addition, some payment processors also charge a flat fee for using their services. So, you should compare the fees from different payment processors to make sure it aligns with your budget.
PayPal charges a 2.9% card processing fee if the recipient is based in the UK and more for international customers. Stripe charges a 1.50% card processing fee and a 20p flat fee for standard UK cards, and slightly more for premium cards.
Point-of-sale (POS) systems often integrate with payment processors or gateways. However, you should opt for a POS provider that allows you to choose a payment processor. Otherwise, you could be left to pay unnecessarily higher fees to whichever processor the POS provider chooses.
Payment methods
Consider what online payment methods you want to accept and choose a payment processor that supports those options. This will give your customers the opportunity to pay with the method that best suits them, increasing customer satisfaction and sales.
Debit cards were the most used payment method in 2023, accounting for half of all payments in the UK. However, many customers also use credit cards, mobile wallets like Apple Wallet, or “buy now, pay later” services such as Klarna.
In addition, ensure that the payment processor you choose supports payments in the currencies you accept. This is especially important for online stores with customers from all over the world.
Customer support
It is likely that customers are able to shop on your online store 24/7, so consider choosing a payment processor that can offer you customer support anytime – in case of any issues.
Look for a payment processor that offers efficient and helpful customer support via phone, email, and live chat. You can read reviews to better understand which providers offer the best customer support.
Integrations
If you already have an established online store, you’ll want to ensure the payment processor you are considering integrates with your website or eCommerce platform, your current POS system, and any other business tools you use, such as your accounting software or customer relationship management (CRM) system.
Transaction speed
Payment processing speed can impact your cash flow. Slow processing can eat into liquidity, making it harder to manage operational costs and invest in your online store.
Some payment processors offer faster processing times than others, so consider this when deciding.
In addition, you’ll want to consider the processor’s hold policy. This is how long the payment processor holds onto the customers’s money before depositing it into your business account.
Mobile-friendliness
In 2023, 70% of online orders in the UK were made using mobile phones. Therefore, your chosen payment processor must be mobile-friendly.
Ensure that the provider you choose has a mobile-friendly interface, supports mobile payments, and is compatible with the size of mobile devices.
Scalability
As your online store grows, you’ll want a payment processor that can grow with it. This will support your business operations and potentially help you expand globally.
Look for payment processors that can support a high volume of customer transactions, offer customised payment methods, and integrate with additional tools or software.
Ready To Choose A Payment Processor?
As mentioned, choosing the right payment processor is critical for your online store. By considering the eight things explored in this article, you’ll easily find a payment processor that meets your unique business needs and budget.
Remember, the most important considerations may vary depending on your business size and needs. Just take your time, do some research, and choose the option that best aligns with your business goals.
