small business payment processing

Payment processing can be difficult to navigate if you’re just starting out with your business. However, you must have your own payment processing system in place if you’re serious about growing your business—and avoiding costly payment processing mistakes that might ruin your bottom line altogether.

The following are the five most important things you need to know about small business payment processing systems and how they work.

What is payment processing?

At its core, payment processing is a system that facilitates payments from buyers to sellers. In other words, it’s how you take payments from customers using credit cards, debit cards or direct bank transfers.

Because it helps to keep your business compliant with regulations like PCI DSS (Payment Card Industry Data Security Standard), compliance is usually mandatory for all businesses processing card payments.

Depending on your business type and size, there are different services out there that can provide processing solutions to fit your needs. Choosing between them can be confusing—if not downright intimidating—especially if you’re new to payment processing.

How much does it cost?

The cost depends on many factors. For example, if you’re accepting credit cards by phone or mail, then you don’t need to pay your customers extra, as they’ll be paying your company directly.

But if you’re processing payments through a mobile app or website, then an additional charge might be necessary (this is known as a merchant fee).

A merchant account can help reduce these fees but some types of businesses can only use certain merchant accounts, which will affect pricing (in addition to other factors). Be sure to understand what fees are associated with using your payment processor.

This way you’ll know how much money you’ll need upfront and how much to budget for ongoing expenses.

Why should I pay someone else to process my payments?

The short answer is that it’s extremely difficult to process credit card payments correctly, legally, and securely.

 If you’re a business owner who is trying to do it yourself, you’ll need to get your hands on both a merchant account (the account that actually processes your payments) and a payment gateway (the service that passes your customer’s information from their browser to your merchant account).

 It can take a lot of research to find providers that provide both—let alone one with competitive pricing—and once you’ve found them, you still have to configure those products properly. The whole process could easily eat up several days or weeks depending on how much DIY work you want to do.

What is the role of a payment processor?

A payment processor is a company that sits between your business and its customers when it comes to money.

Essentially, they act as a clearinghouse:

  • taking all of your orders,
  • collecting funds from customers
  • refunding customers on your behalf,
  • handing you an amount of cash at regular intervals, etc.

With hundreds of different payment processors in operation today, it can be tough to know which one is right for you; there are numerous differences between these companies–from cost to type of service to customer support–that make each one unique.


Understanding small business payment processing ensures you partner with a service that meets your specific needs.