Before you shop around for a merchant payment provider, it’s necessary to understand how merchant payment processing works. When you’re knowledgeable about what processing online transactions entail, you’ll have a better idea of what to look for in a merchant payment processing provider. Knowing how payment processing works also gives you a better idea of what solutions suit your business’ needs.
Having options that enable customers to pay with debit or credit, or online, is a fantastic business move. It empowers you as a business owner to cash in on the 70 percent of Canadians who prefer cashless transactions. The better you understand payment processing, the better you will be able to capitalize on customer buying behaviours as well.
So, without further ado, here’s what you should know about merchant payment processing.
Secure a Merchant Account
All your payment processing will be handled via a merchant account where the funds from transactions will be stored. Securing a merchant account can be a simple process, but it might be more difficult to find a willing bank or provider if you’re labelled a high-risk merchant.
Once you’ve found a provider that will work with your business and have been approved for an account, the provider will help you choose and set up an appropriate merchant payment processing system.
Again, what type of system you need will depend on your business environment. If you own a marijuana dispensary, you might prefer online payments and have an e-commerce site set up. Perhaps you own a restaurant or retail store that requires a mix of mobile payment apps and point-of-service (POS) terminals. After your system is in place, you can start running transactions.
Payment Processing Is about Information
When customers use their credit cards at the store or submit online orders with your merchant processing system, you are collecting pertinent information from their cards to complete the transactions.
Whenever customers tap, swipe, or insert their cards, you’re collecting their information so you can transfer it to your merchant services provider.
When this information is transferred, it’s done so through a secure authorization request. Once your provider receives this request, it is then sent to the customer’s bank or card issuer for authorization. If the request is approved, then the transaction amount is sent to your provider who will forward it to your merchant account.
Get Backup for Returns and Chargebacks
If customers aren’t happy with their purchases and want to make a return, you must make sure you have procedures in place to deal with these scenarios. In the case of a return, send a request to your provider to transfer the amount of the transaction back to the customer’s bank or card.
If a customer disputes a transaction made with a credit card, this results in a chargeback. For high-risk merchants especially, chargebacks are a worst-case scenario. A customer is submitting a claim for a suspect transaction. An investigation is then triggered by the credit card issuer, during which time the amount disputed is withdrawn and held from your merchant account. Chargebacks can be detrimental to your cash flow. Ensure you work with a provider that offers chargeback protection.
Luckily, some providers will give you chargeback insurance for up to $1,000 for opting into a streamlined, all-inclusive pricing plan for your merchant account. You can never be too careful when it comes to keeping your business financials in good standing.
There you have it. You know all about merchant payment processing and are ready to find a reliable payment provider.