How to Choose the Best Payment Service Provider

Last Updated on February 8, 2021 by

These days, you can’t have a business that doesn’t accept debit or credit cards. Oh, sure, there’s the occasional brick-and-mortar holdout who will never, ever accept credit cards, but they’re so rare that you can’t use them as an example of how to run a business. (A friend told us about a bookstore in Indiana where the owner only ever accepted cash. His payment policy included directions to the ATM across the street.)

Conversely, there are some businesses that are trying to get away from handling cash so desperately that they’ll accept any and all forms of digital payments.

If you’re starting a business, you need to work with a payment service provider to be able to process any form of payment other than cash. But there are so many of them out there, and so many options to choose from, whether they’re a bank, an independent service provider, or one of the popular online payment services. It’s hard to know which one is right for you.

So here are a few things you should know when trying to figure out how to choose your payment service provider for your own business.

First, you need to decide what kinds of payments you want to accept. Do you want just the Big Four credit cards, Visa, Mastercard, American Express, and Discover? Do you want to include JCB and China UnionPay? Or Bitcoin, Ethereum, or other cyber currency?

Every payment service provider can help you with the big four, some can help you with JCB and China Union Pay, and only a few can help you with cyber currency.

Second, do you want a dedicated or aggregated account? A dedicated account means the provider works directly for your business. Your transactions are the only ones being processed through that account and you’re in full control of the way it functions. When you accept a credit card payment, the money is deposited directly into your bank account (minus the processing fees). The processor can deal with errors, handle potential fraud, and even withdraw money from your account to cover chargebacks.

A aggregated account is where a larger service uses a single merchant account to provide credit card processing for many merchants. PayPal, Square, and Stripe are all aggregated accounts. When a transaction is made, the money goes into the service provider’s account first before it’s deposited into your account, usually a few days later (minus any processing fees). And they keep a portion of your payments in a rolling reserve account to cover any possible chargebacks.

The downside to an aggregated account is that they get to make up and change all the rules on their platform, which can have a devastating effect on large swaths of merchants. For example, in 2019, PayPal unilaterally stopped payments to over 100,000 models on Pornhub.

While this is also a danger with a dedicated account, if you’re working with a high-risk merchant account provider, they at least have alternatives to find new ways for your company to accept payments.

Plus, if you’re a high-risk merchant, your payment provider already knows it, so they’re less likely to pull an unexpected, unilateral surprise like PayPal did.

Third, don’t make a decision just based on the price. For one thing, there are so many different ways to price a payment service account. You could get lower processing fees in exchange for higher per-transaction costs. Or you could pay monthly subscription fees. Or they could waive the monthly fees and charge you higher processing fees.

Everyone gets paid somehow, but they all get it in different ways.

That’s because companies that charge lower prices often find other ways to make up what they’re giving up. There could be equipment rental fees, subscription fees, cancellation fees, or you could be on a tiered plan. So when someone promises you the lowest price, just know that they’re making it up somewhere else.

That doesn’t mean that lower-priced options are necessarily bad. Banks, for example, charge higher-than-necessary prices and you’ll end up paying a lot more for something you could have gotten a better price on. For example, many processors, including banks will rent the card processing equipment to you for as much as $50 – $60 per month, or you could buy the box for anywhere from $100 – $300. You could pay as much as $3,000 over four years for something you could buy for 10% of that.

You also want a provider that helps you fight chargebacks and friendly fraud. Chargebacks are such a big problem right now, and a majority of them are actually related to fraud. You need a payment service provider that will not only help you fight chargebacks, but they’ll help you avoid them in the first place. Look for a provider that has a method of identifying and fighting chargebacks, including identifying fraud patterns with artificial intelligence and machine learning.

Make sure your payment service provider is focused on security. Both you and your provider will be storing customers’ personally identifiable information, so you want to make sure that it’s safe from cybercriminals and hackers. Make sure your provider is using the latest encryption and security software so your valuable data won’t be lost in a breach. (Make sure you’re using it, too.)

Finally, your payment service provider should also provide great customer care. You might think that’s just a throwaway line that every company says they have, or you think you won’t need, but if you ever have a problem with chargebacks, fraud, or a cancelled merchant account, you’ll be glad you have someone that truly offers great customer service.

Look for a provider that has 24/7 support via phone, email, and online chat. Find one that highly prioritizes your business and will work with you for years. Be sure to look at their reputation and see what other business owners are saying about them. Check Yelp, Google My Business, and any sites where they rate payment service processors.

When you’re looking for your payment service provider, ask a lot of questions and spend some time speaking to your sales representative. They should be willing to spend the time to answer your questions and put you at ease with your decision. If they’re not, that might give you an indication of the kind of provider they’re going to be.

If you’d like to learn more about opening your own merchant account, or just have questions about what kinds of things to look for from a payment service provider, Corepay can help. Just visit our website or call us at (866) 987-1969.

Don’t forget to look for our virtual booth at the Internext virtual conference this week, February 10 – 11.

Photo credit: Ahmad Ardity (Pixabay, Creative Commons 0)