Choosing the Best Online Payment Processor

Why Your Choice of Payment Processor Matters

Online businesses tend to enjoy better cash flow than offline businesses — a clear signal that merchants need to pair advanced payment tools with their operations. This is where an online payment processor comes in. Many processors offer many services to merchants, but will you get satisfactory service from all of them? Choosing the best online payment processor can be tricky: like a relationship, you can put everything in and, with the wrong match, get nothing back.

The same can happen with a payment processor — you work hard to grow your business but don't get adequate support from your processor's end. The right payment processor can completely change the ecosystem of your business; you will see remarkable growth, but you need one good match.

What Is a Merchant Account?

A merchant account is a basic requirement for operating a business online, and it is worth understanding before signing with any processor. A merchant account is a kind of business bank account, but unlike a regular account it does not hold funds for a long period. You need it to accept debit card and credit card payments, and you make an agreement with the online payment processor and bank for the settlement of all online transactions.

On the basis of this agreement you get your merchant account. After the credit and debit card payments at your business are processed, funds land first in the merchant account; the processor then deposits them to your business bank account. This typically takes one or two business days, though some payment processors take up to a week.

Master Merchant Account vs. Designated Merchant Account

Not every online payment processor provides a designated merchant account. Many payment service providers will not give you a separate merchant ID; instead, they share a master merchant account among their customers. If you have an established business and are looking for a complete payment solution, that arrangement may not work for you.

With a shared master merchant account, you skip a complicated signup process — no upfront credit checks or underwriting. The drawback: if the processor tracks anything unusual, it can freeze your account to prevent fraudulent activity and hold your funds, and it can take a long time to get that money into your business bank account, often without proper customer care along the way.

With a designated merchant account, a simple phone call to your payment processor can resolve such problems. There is direct involvement from the processor, which will address concerns before they become a major threat to your business. The trade-offs are higher overall cost and a more involved signup process.

Questions to Ask Before Choosing a Payment Processor

Once you understand merchant accounts, certain questions are worth asking any online payment processor before choosing it:

• Ask about everything in the contract terms and conditions.

• Do not forget to ask about the real processing fee.

• Ask whether you need to pay any extra fees.

• Ask how you get help when you have a problem.

Also check whether the payment processor outsources its customer service. If the processor has an in-house team, you are far more likely to get satisfactory support — and a processor that keeps its contract terms, pricing and support transparent is the kind of match that helps a business grow.