Payment Processing Blog

Accepting credit cards offers a number of benefits to merchants and consumers alike, and can provide a dramatic boost to your sales and cash flow. But that boost can be diluted somewhat if you don't pay attention to the various factors that influence the fees associated with accepting electronic payments.  There are many available options and partners to choose from.

Research into how payments are accepted and processed can literally pay dividends to those merchants wanting to reduce their payment-related expenses:

For a start charges vary wildly, with typical charges for card payments varying between a straight 1.5% and 3.4% plus 20p per transaction depending upon volume.  If taking payment by online direct debit collection is potentially an option, then charges can be anything from 4p to £1.00 per transaction, again depending upon the provider and transaction volume.

1. Don't fall 'special offers' on rates as the small-print could see you paying over-the-odds within a few short weeks.
2. Weigh up the pros and cons of the various providers and beware of 'hidden charges' as they are numerous in certain circumstances.
3. If using card payments, take advice on reducing charge-backs that could see you paying extra fees for cancelled/reversed transactions.

Following these steps and paying careful attention to payment methods, procedures and security requirements will pay considerable dividends in improving your productivity and profitability, and reducing payment related fees.

Businesses across many sectors take regular weekly, monthly or quarterly payments from their customers. Payment for these services will usually be taken using one of three methods:

1. Manual Invoicing and payment by cheque
2. Manual or Automated payment by Credit Card
3. Payment by direct debit.

Manual Invoicing

We're probably all familiar with the pain of waiting for cheques to arrive in the post and the admin overhead in telephone calls and emails chasing payment, so in today's business environment, this is not suited to regular payment collection.

 Card Processing

There are literally hundreds of card processing agents (other than the banks) that can help you take credit and debit card payments for your business. They can be set up to take payments face-to-face, over the phone or online, however the application and set-up process can be quite lengthy due to business and credit checking requirements. Once set up, the process works very well but does have a couple of drawbacks for recurring payments, which can become a problem when trying to retain customers over the longer-term.

1. Payments halt when the card expiry date is reached, which can become problematic with a large customer base. This then requires administrative overhead to fix.
2. If you wish to amend your pricing, this requires a completely new approval process
3. Further manual processing is required if a card payment is declined.

Direct Debits

Using a direct debit solution, whilst not completely infallible, offers a simpler, cheaper and far more effective method for collecting regular customer payments.  It offers a far more automated approach:

1. Changing payment amounts requires one change to the account and the notification letters are automatically generated.
2. Unsuccessful collections are automatically represented, reducing the amount unpaid and ensuring payments come through quicker.
3. No expiry date issues to contend with.

Hope this helps with your decision-making.

If you have a website or are building one and want to be able to process debit and credit card transactions, then here is a simple guide to help you understand how the system works.

Essentially you need two main components that are required to process online payments:

1. Merchant Account
2. Payment Gateway

Merchant Accounts
A Merchant Account is a contract between a bank or payment service provider and a company allowing that company to accept debit and credit card payments. 

If you already have an account for processing offline payments, then it can be quite straightforward to extend this account to enable internet payments to be taken.  If however you don't have a merchant account, then it can be quite onerous to apply to your bank, with an often lengthy and costly application process involving submission of business plans, financial forecasts and audited sets of accounts.

A quicker way round this can be to use a Payment Service Provider such as Eazy Collect who can offer favourable terms without the lengthy application processes that the banks use.  This is particularly useful for start-ups and smaller companies who may find it difficult to get a Merchant Account via the bank.

Payment Gateway
This is the internet equivalent of the chip and pin machine found in most shops that process and approve or reject each individual transaction for all major debit and credit cards in circulation.  There are many components to a payment gateway including secure entry of personal and card details, encrypting your details for transmission across the internet to the acquiring bank, a back office for the merchant to check transaction status and process refunds.

Eazy Collect can simplify the process by providing a one-stop solution to simplify the whole process to have companies up and running in a matter of days.

I hope this helps cut through the jargon and breaks it down to complete basics for those of you who are unfamiliar with the topic.

Andy

Tel: 01242 269790

www.eazycollect.co.uk