Consumers are increasingly expecting to be able to pay via credit card and online payment gateways.
Credit card and online payment options undoubtedly provide a host of advantages. They help to attract more customers, considerably broadening customer capture.
They are also responsible for producing high revenue. Customers tend to purchase more when the effect of cash deduction is non-tangible.
Most noteworthy is the factor of convenience, offered by these type of payment methods. It addresses the problem of having to carry cash around and also promotes safety.
However, the nitty-gritty of these payment options has to be thoroughly looked into. Especially from the point of retailers and small business owners.
Small businesses usually store money in their inventory. However, when their business starts expanding, an upgrade in their point of sale system is a necessary measure.
Businesses will then have to start employing options such as credit card machines, POS software, online payment gateways, and e-wallets.
As a retailer, here are five things you need to know, before accepting credit card and online payment gateways:
1. Payout Policies of Credit Card and Payment Gateways
Some of the familiar online payment gateways in Malaysia include MOLPay, eGHL, iPay88 and FavePay. While international ones include Stripe, PayPal, Worldpay, Alipay and more.
Is the payment gateway of your choice flexible? It must be able to adapt to the specific needs of your business and enable you to create your desired business model.
Knowing the processing options of your payment gateway is important. Make sure that your customers can make payments easily and quickly.
Ensure that there is no redirection to a third party site during payment. This is important because customers need to feel safe and only then will trust be established.
The technology integration of your payment gateway should not only be fast and easy for developers but also for you to use as a business owner. Integration processes that are long and difficult to operate, can take weeks. This is can use up a lot of time and money.
2. Fee Structures of Credit Card and Payment Gateways [restrict]
Make sure that you are clear with what the package of your payment gateway entails. Fee structures should also be known in advance.
The last thing you would want to encounter is hidden charges. Therefore be sure to clarify with your gateway provider of the types of fees present and if they are any additional charges.
For instance, PayPal does not charge a setup and annual fee, while Malaysian gateways do, with price variations. Fee structures differ across gateways, and it is always crucial to cross-check directly with the provider.
Among the type of fees to be aware of, include:
- Registration fee
- Setup fee
- Monthly fee
- Annual fee
- Processing fee
- Transaction fee (successful and declined)
- Refund fee
- Chargeback fee
- Other fees that could incur
3. Pay-out Policies and Timeframe of Payment Gateways
Cash flow management is the driving force of every business.
When the expenses of a business exceed revenue, it results in a monetary insufficiency to support business operations. Hence, the event of a cash flow squeeze occurs.
Cash flow squeeze also arises as a result of failure to keep track of expenses for rapidly growing businesses. Therefore, care has to be taken to ensure that businesses do not experience a cash flow squeeze.
When businesses begin to employ payment gateways or credit card options, the payout policy of these services substantially influences cash flow.
This is why it is necessary to check the payout schedule of your gateway provider, to ensure that your payment arrives fast.
The payout period of payment gateways can range from a weekly basis, fortnightly basis to a fixed number of days.
For example, payouts for Stripe are made daily. They also contain payments processed seven calendar days prior. For example, payments received on a Friday are paid out by the following Friday day. If retailers prefer to receive payouts on a fixed schedule, there are weekly or monthly options to choose from.
However, for Paypal, if you are a new host, PayPal may hold your payouts for 30 days after your first reservation is confirmed. Payouts via Airbnb can also vary between 1 day to 7 days depending on the chosen payout method.
Payout periods are not always consistent and can be subject to factors such as payment schedules, payment methods, processing time (including weekends and holiday delays) and so on.
4. Mode of Payout Distribution
Moreover, mode of payout distribution should also be looked into. Will payouts be reimbursed via bank transfer or issuing of check? In cash or credits? Does your bank or payment gateway offer cashback and discounts to your consumers at the expense of your revenue?
It’s important to take note that there exist certain banks and payment gateways that may not reimburse your business with cash payouts directly.
Do take note of this and ask the salesperson or consultant of the bank or payment gateway before signing up.
5. Safety Measures of Credit Card and Payment Gateways
Is the payment gateway safe and secure? It is necessary to check whether the gateway or credit card provider provides fraud protection.
Credit card and online payment gateways must offer an anti-fraud system as well as active chargeback management. Safety measures are not only imperative to protecting merchant accounts, but also the clients of business owners.
The of security of credit card payments have leveled up with the emergence of token technology. This technology replaces credit card numbers with random meaningless numbers, preventing the access of fraudsters and hackers.
Actionable takeaway:
Prior to selecting an online payment provider, research extensively and revise comparison tables. Compare the different packages offered by different providers. This will help you to identify the best fit for your business model.
Directly communicate with providers and ask as many questions possible.
Check out reviews by other retailers as well as forums. Reach out to other business owners you may know. Case studies are a good way to know whether the promises and claims of online payment providers are actually true.
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