With only 16% of consumers carrying cash and the popularity of ecommerce, if you don’t have a payment processor for your business, you’re missing out.
In this post, we’ll talk about the software options available for accepting payments online — including some free options, and how payment processing can help streamline your business processes and increase sales.
But first, let’s cover the basics of how payment processing works.
What is payment processing?
A payment processor is a company that facilitates electronic payments (credit card, digital wallets, ACH) between a business and the bank. Essentially payment processors handle all of the backend logistics between merchants, banks, and credit card companies that enable businesses to accept payment.
How does payment processing work?
When you shop at a retailer and pay with a credit card, the payment processor works in the background to authenticate and complete the transaction, moving the money from your account to the business’ account.
Here’s what happens behind the scenes when a customer makes a card payment:
A customer gives the merchant their credit or debit card to make a purchase. This is either done using a payment terminal in-person or through an online payment page.
The card information goes through a payment gateway or portal which encrypts the customer’s personal data to ensure privacy and sends it to the payment processor.
The payment processor then sends a request to the customer’s issuing bank to see if they have enough credit (or cash if using a debit card) to pay for the purchase.
The card issuer either approves or denies the purchase.
The payment processor sends this “approved” or “denied” info back to the retailer to complete the transaction with the customer.
Once complete, the processor tells the customer’s bank to send funds to the retailer’s banking institution.
While this sounds like a lot of steps, it all happens in a matter of seconds and requires no work on your end or the customer’s.
Benefits of Payment Processing
Here’s a look at some of the advantages payment processing software will bring to your business.
Convenience is one of the main factors that influence conversion rate. The more steps a customer has to take to make a payment, the more likely they are to abandon their purchase and go elsewhere.
Payment processors can transfer most payments between shoppers and sellers instantly. On the other hand, transfers to and from bank accounts can sometimes take 24 hours or more.
Many payment processors are brands that are globally recognized. If a customer already uses payment software, they’re more likely to trust your payment system.
Payment processing companies add an extra layer of protection to online transactions. You can set limits, flags for activity on your account, and sometimes even a time frame to recall payments.
With payment processors, you’ll have access to your account online and can manage your contacts, recurring payments, and other account activity via desktop or mobile.
Costs to Consider When Using Payment Processors
While payment processors offer convenience and security among other perks, they also come at a cost. Each player in the payment chain — banks, credit card companies, and the payment processor takes their cut. Here are some of the transaction fees to look out for.
Interchange Fee: These are fees paid to the card issuer (Chase, TD Bank, Bank of America, etc.) The card issuer gets paid by getting a percentage of each sale.
Assessment Fee: These fees are paid to credit card associations (Visa, Mastercard, Amex).
Acquirer or processor Fee: These are fees paid to the processor (PayPal, Square, Stripe).
Merchant Fee: This is a fee paid to your merchant bank. The percentage charged will depend on the volume of transactions, the number of sales, and the industry.
The interchange, assessment, and merchant fees are bundled together and quoted as one percentage. The Processor fee is quoted separately. For example, your transaction fees could be 3% total with a $0.20 processor fee per transaction. This will be good to keep in mind when considering what pricing structure to go with, which we’ll explore in the next section.
Payment Processing Pricing Structure
Another factor to consider is pricing structure, which will vary from one processor to another. This structure typically falls within the categories below:
1. Interchange Plus
With Interchange Plus pricing, the retailer pays an additional fee plus the interchange amount. For example, you would be paying a 3% interchange rate plus a $0.25 per transaction.
Pros: This can be a more cost-effective option than other structures.
Cons: Because there are hundreds of interchange rates, the costs will vary significantly from one transaction to the next.
This is a fixed rate percent for all transactions paid in a certain manner regardless of the interchange rate. For example, you could pay 2% plus $0.20 for in-person purchases and 2.5% plus $0.25 for online purchases.
Pros: Your costs are predictable.
Cons: Your costs may be higher than the interchange plus model if you have a high volume of sales.
Tiered pricing combines aspects of flat-rate and interchange plus. In this model, interchange rates are categorized into buckets or tiers. The processor then assigns a cost to each tier. For example, on a $75 purchase, you could have fees ranging from $2 to $3 depending on which tier it has been classified as.
Pros: Rates are easier to understand since the hundreds of possible interchange fees are bundled into predetermined tiers, making costs more predictable.
Cons: Since the processor sets the tiers, the overall costs can be higher than the other options.
Now that we’ve explained the costs, let’s look at some of the best online payment processors on the market.
Top Online Payment Processing Providers
Once you’ve developed a strategy for accepting payments online, you’ll need to decide which payment processing provider to use. Here are seven of the most popular options:
PayPal is one of the most trusted and widely recognized payment processing companies. It’s free to join and they provide all the tools you’ll need to integrate PayPal payments into your website and set up a secure payment gateway for visitors. Additionally, comprehensive coverage makes the platform a good choice for international companies.
Stripe offers a wide range of options for online businesses such as customizable checkouts as well as subscription management and recurring payment features. Stripe supports all major credit cards, mobile paying apps, wallets, and more.
Price: Google Pay doesn’t charge any fees — merchants only pay transaction fees as usual with credit/ debit sales.
Google Pay has a payment tool for businesses, websites, and apps. Google Pay’s APIs work to create a delightful checkout and payment experience for your customers.
If you use Google Pay on your website, you’ll gain secure and easy access to hundreds of millions of cards saved to Google Accounts worldwide so customers can pay for your products safely and at the touch of a button.
Price: Apple Pay doesn’t charge any fees — merchants only pay transaction fees as usual with credit/ debit sales.
Apple Pay can be used on websites, in stores, by app, and via Business Chat or iMessage. It allows Apple users to quickly and safely input contact, payment, and shipping information during checkout.
Rather than having your ecommerce customers look around for their credit cards, Apple Pay allows them to checkout at the click of a button within apps and websites. On a website, an Apple users will simply click “Apple Pay” as their payment option, confirm the payment with one tap (via their iPhone, Apple Watch, etc.), and they’re good to go.
Venmo For Business is a mobile payment software and app owned by PayPal. You can choose to allow users to pay via your mobile app or your website.
You can set up a business profile on Venmo so users can quickly find your profile on the app. And if you add Venmo to your website, it’ll appear as a payment option right next to where it’ll give customers the option to pay with PayPal.
Once a customer selects the Venmo option at checkout, they’ll be directed to their Venmo app to complete the transaction. The Venmo payment option can be added to any of the pages of your ecommerce site that would also show the option to pay with PayPal, including your product pages, shopping cart page, and checkout page.
Helcim is an online payment solution for ecommerce businesses — you can choose to start an online store from scratch or add a payment solution to your current website.
The easy-to-use and secure online payment system integrates into your website, shopping cart, billing system, and/or app, thanks to Helcim’s API. In addition to in-app and via website, Helcim works over the phone, in person, and by invoice, and it integrates with your accounting tools to save you time when it comes to bookkeeping.
Next, let’s cover the steps involved in receiving payments online.
How to Accept Payments Online
Create a secure online payment gateway.
Facilitate credit and debit card payments.
Set up recurring billing.
Accept mobile payments.
Use email invoicing.
Accept electronic checks (eChecks).
Accept cryptocurrency payments.
1. Create a secure online payment gateway.
There are a couple of ways you can approach creating a secure online payment gateway. You can hire an outside developer or use your website development team to create a bespoke gateway. Or, you can use third-party software.
Setting up a secure gateway is essential. You’re also putting automated processes in place, which will save time on manual processing, especially as you scale your business and handle more transactions.
The more payment methods you make available within your payment portal, the wider the audience, and the easier it’ll be for your customers to send you money.
2. Facilitate credit and debit card payments.
Although it may change as mobile payments become more prevalent, using debit/ credit cards is still the most popular way people pay for products and services online.
You can easily facilitate accepting card payments through established payment providers such as PayPal or Stripe. These will accept the most-used credit cards worldwide — Visa, MasterCard, and American Express.
3. Set up recurring billing.
If you offer subscription plans or ongoing monthly services, the most efficient and reliable way to invoice and receive payments is via recurring billing.
Most of the major payment processing software also includes recurring billing features. For example, Growth Marketing Pro built an SEO tool that charges subscribers on a monthly basis and they used Stripe to set this up.
Sites like Paysimple also offer a suite of tools to set up custom, automated recurring billing if you already have a payment processing system in place.
Using automation is essential. It removes most human error and the stress of keeping track of invoicing and payments.
Your customers can commit to recurring payments with just a few clicks, and you won’t have to worry about manually managing your customer base.
4. Accept mobile payments.
These days, people are often more likely to have their phones on hand than debit cards — plus, mobile payment apps are more convenient than ever.
For instance, Apple Pay has quickly become one of the most popular mobile payment systems in the United States. With an estimated 43.9 million users, you’d miss out if you didn’t accept Apple Pay.
Google Pay, Venmo, and PayPal also have mobile apps with a decent market share.
5. Use email invoicing.
Email invoicing is a proactive way to request payments. You can share a payment form through email or add a link redirecting the recipient to a payment portal.
However, there are a couple of issues with this method: Email isn’t the most reliable form of communication, and customers can have trust issues making payments via email.
Expect a failure rate, but it’s a vital part of payment processing for a lot of businesses.
6. Accept electronic checks (eChecks).
To accept eChecks for payment, you need a form where the user can input their information, which you can see using payment processing software.
It’s basically a way to pay by check online. It’s a quicker and more reliable way than sending a paper check through the post, so offering this to your customers will make the process run smoother.
7. Accept cryptocurrency payments.
If you’re okay with handling cryptocurrencies, it’s a way you can extend your reach to a broader online audience.
Sites like Bitpay provide all the tools you need to accept crypto payments online, send invoices, request payments, and receive money on the go-through apps.
Because they’re a decentralized exchange, cryptocurrencies offer some unique benefits for businesses. You can accept payments from anywhere in the world without incurring currency exchange fees or bank handling fees. There’s also a reduced risk of fraud.
Start Accepting Payments Online for Free
No matter which payment processing software you choose, the most important part is making it easy for the customer to pay. And the more ways they can pay, the more likely your customers will follow through on a purchase.
Editor’s note: This post was originally published in April 2020 and has been updated for comprehensiveness.
Old Navy will update its yearly Fourth of July promotions by saluting the metaverse with an NFT drop, going live June 29.
In honor of the year they were founded, the retailer will release 1,994 common NFTs, each selling for $0.94. The NFTs will feature the iconic Magic the Dog and t include a promo code for customers to claim an Old Navy t-shirt at Old Navy locations or online.
“This launch is Old Navy’s first activation in web3 or with NFTs,” an Old Navy spokesperson told MarTech. “As a brand rooted in democratization and inclusivity, it was essential that we provide access and education for all with the launch of our first NFT collection. We want all our customers, whether they have experience with web3, to be able to learn and participate in this activation.”
Accessible and user-friendly. Any customer can participate by visiting a page off of Old Navy’s home site, where they’ll find step-by-step instructions.
There will also be an auction for a unique one-of-one NFT. All proceeds for the NFT and shirt sales go to Old Navy’s longtime charitable partner, Boys & Girls Clubs of America.
Additionally, 10% of NFT resales on the secondary market will also go to Boys & Girls Clubs.
The Old Navy NFTs will be minted on the Tezos blockchain, known for its low carbon footprint.
“This is Old Navy’s first time playing in the web3 space, and we are using the launch of our first NFT collection to test and learn,” said Old Navy’s spokesperson. “We’re excited to enable our customers with a new way to engage with our iconic brand and hero offerings and look forward to exploring additional consumer activations in web3 in the future.”
Why we care. Macy’s also announced an NFT promotion timed to their fireworks show. This one will award one of 10,000 NFTs to those who join their Discord server.
Old Navy, in contrast, is keeping customers closer to their owned channels, and not funneling customers to Discord. Old Navy consumers who don’t have an NFT wallet can sign up through Sweet to purchase and bid on NFTs.
While Macy’s has done previous web3 promotions, this is Old Navy’s first. They’ve aligned a charity partner, brand tradition and concern for the environment with a solid first crack at crypto.
Get the daily newsletter digital marketers rely on.
About The Author
Chris Wood draws on over 15 years of reporting experience as a B2B editor and journalist. At DMN, he served as associate editor, offering original analysis on the evolving marketing tech landscape. He has interviewed leaders in tech and policy, from Canva CEO Melanie Perkins, to former Cisco CEO John Chambers, and Vivek Kundra, appointed by Barack Obama as the country’s first federal CIO. He is especially interested in how new technologies, including voice and blockchain, are disrupting the marketing world as we know it. In 2019, he moderated a panel on “innovation theater” at Fintech Inn, in Vilnius. In addition to his marketing-focused reporting in industry trades like Robotics Trends, Modern Brewery Age and AdNation News, Wood has also written for KIRKUS, and contributes fiction, criticism and poetry to several leading book blogs. He studied English at Fairfield University, and was born in Springfield, Massachusetts. He lives in New York.