What Is A Third-Party Payment Processor? 2023 Guide

It doesn’t process the transaction directly, but rather, just makes sure the card is valid, similar to how a point-of-sale terminal checks a physical credit card’s chip. For example, you might pay 1.7% plus 25 cents for debit cards and 3% plus 30 cents for a high-end rewards card. As a high-risk merchant, you’ll be subject to the same types of fees as any other merchant, but they might be higher. You may pay a setup fee to open your account and a termination fee to close it, plus per-transaction fees, terminal fees (for in-person payments) and chargeback fees. When you apply for a merchant account, you’ll be required to provide business and tax documents. After your application has been processed, your payment provider will assess whether you are a high-risk or low-risk merchant and adapt their plan accordingly.

This payment processor is popular among small business owners for its many physical card readers and card payment apps, which enable you to process transactions even on-the-go. When it comes to launching your own online store with WordPress, choosing a WooCommerce payment gateway is an important step. There are many factors to consider during this decision, including how your customers will perceive your checkout options and what fees your solution requires. PayPal is popular with small e-commerce businesses and online service providers who don’t mind paying its high fees in exchange for a well-known platform. ✨ In this guide, we go step by step through the basics of payment processing and also explain the difference between a payment processor, a payment gateway, and a merchant account. Google Pay is a digital wallet, not a third-party payment processor.

The Square magstripe and chip card readers are compatible with most Apple devices running iOS 11 and above, and Android devices running version 5 and above. Square works with any US-issued and most internationally-issued magstripe or chip cards bearing a Visa, MasterCard, American Express, Discover, JCB, or UnionPay logo. All inclusive—fraud prevention, dispute management, reporting, and team and inventory management. No startup fees, subscription fees, PCI compliance fees—you get the idea. Customers can pay with a tap by using a contactless card or a mobile device with Apple Pay or Google Pay. Key in payments from your clients remotely or in person to minimize contact.

Best Emergency Business Loan Options For Your Small Business

You can get a merchant account through a merchant services provider or from a payment service provider . Common PSPs include PayPal, Square, Stripe, and even QuickBooks Payments. You’ll want to use a payment gateway if you’re branching into the world of e-commerce.

In 1972, the first Automated Clearinghouse association was formed in California in response to bank industry concerns that widespread check usage would outpace the technology needed to process them. ACH became the primary method of electronic funds transfer for agencies, businesses, and individuals to pay or collect money online, and is still commonly used today. Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication.

Additionally, if you want to offer alternative methods such as PayPal Credits or Apple Pay, make sure your chosen platform supports those features. In this case, look for merchant account services targeted at high-risk merchants. They usually charge higher fees than the providers in this list, but they make it possible for high-risk merchants to continue to do business. What keeps it among the top providers is largely its ubiquity—customers are familiar with and trust the platform because it’s been around for so long. You might have heard of Sage Pay, which is now known as Opayo and offers many of the same services. It’s one of the best online payment processors for small business due to its tiered pricing plans, fraud screening tools, and extensive customer support.

Payments

Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity. The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. According to a 2023 market research report by Mordor Intelligence, the Latin America market for mobile payments is expected to grow at a CAGR of 24.5% from 2022 to 2027. But behind the scenes, there are a number of sophisticated steps and precise systems working together to move funds from buyer to seller — and a payment gateway is part of that magic. Your card statement will list your payment as “United States Treasury Tax Payment” and your fee as “Tax Payment Convenience Fee” or something similar. Square Reader for contactless and chip connects wirelessly with your device so you can take card and contactless payments easily.

While there’s no early termination fee to worry about for your account, PaymentCloud does lease equipment. While this can be convenient for some business owners, others may need to be wary of reluctantly signing up for long-term commitments. Your online store’s payment gateway is one of its most important features. When it comes to WooCommerce, you have many top-notch options available to choose from.

The exact differences between payment processors, payment gateways and merchant accounts are not that clear at first. However, the visuals and the outlines above should give you a decent idea as to how the whole process works. Besides sending the transaction details to the merchant account, the payment processor also has the job of contacting the issuing bank of the credit card used. That check is meant to make sure that the customer has enough funds and that it’s a legitimate card. PayPal is one of the oldest payment service providers on the market, and enjoys a high degree of trust with the public and a huge userbase.

Ecommerce businesses who get fresh content and tips from us

Common digital wallet payment methods are Google Pay and Apple Pay, though some retailers have their own digital wallet app, like Walmart Pay. These all link back to the customer’s debit or credit card, so often it’s just the payment authorization that’s different. A merchant account is the account customer money goes into prior to being automatically transferred into payment processors for forex your business bank account. You’ll need both a payment gateway and a payment processor if you run an e-commerce business that accepts online payments. It’s also important if you want to accept point-of-sale or mobile device payments. If you have a traditional brick-and-mortar business and don’t plan to offer online sales, all you’ll likely need is a payment processor.

• Some payment processors also specialize in high-risk processing for industries that are subject to frequent chargebacks, such as adult video distribution.
• First, the customer completes your checkout process on your website, or in-person, entering their credit card information into the appropriate terminal.
• He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law.
• If you want to use your own payment processor, you can just use PayPal’s payment gateway Payflow.
• If there’s not, the customer’s card may be denied—and that information is all relayed almost instantaneously in real time.
• Third-party payment processors are a relatively new way for small and first-time business owners to accept credit and debit cards without the need for a traditional full-service merchant account.
• The company also expects to continue repurchasing stock in 2023 as the firm’s cash position allows it to.

Adyen accepts over 250 payment methods and 150 currencies through a single platform. It is fully certified for standards including PSD2 SCA and PCI compliance and offers advanced fraud protection methods with AI and a rule-based risk ecosystem. Your customers need a reliable and simple way to pay for the things they want, and a payment processor provides that.

Etsy warns of merchant payment processing delay due to Silicon Valley Bank collapse

This approach results in lower overall costs for suitable businesses, and also streamlines the underwriting and account approval process. Depending on the payment processor you choose, you might find that your service provider offers a variety of pricing models to explore. Tiered models are usually the most expensive, and it’s worth noting that the amount you pay to accept credit and debit card payments might not be entirely transparent. We reviewed several merchant account companies using a detailed methodology to help you find the five best high-risk merchant account providers.

Your small business can take advantage of this ecommerce boom with a seamless online checkout and payment processor to complement any in-person sales. It’s important to keep in mind that not all payment processors are created alike, with some catering more effectively to small businesses than others. Here’s our roundup of the best online payment processors for small business. With AI technology, Swipesum detects when a business is overcharged for its credit card processing by looking at its processor relationships, contract negotiations, and pricing structure. Then, using a reading software that can verify interchange fees and pricing, they look at ways to optimize your payments.

Learn why BMW chose Stripe to power e-commerce and payments

Since its inception in 1998, PayPal has become the biggest player in the payment processing game. The company now operates in more than 200 countries/regions and supports ~25 different currencies. Shopify, for example, integrates with over 100 payment gateways including Stripe, PayPal, Authorize.Net and 2checkout among others.

Our fee calculator can help you estimate your costs for processing payments. You can use Stripe not only to accept payments but also to quickly support new markets, upgrade existing systems and tools, go direct-to-consumer, and engage customers with subscriptions and marketplaces. Get expert integration guidance from our professional services team and certified partners so you can see value with Stripe faster. Leading ecommerce platforms like Shopify and BigCommerce support a host of payment processors and gateways. If you want to use the same payment processor you would use with your brick-and-mortar store, however, you may need to resort to a third-party solution. Your payment processor may not always be supported by an ecommerce platform directly.

Best for U.S.-Based Businesses

The main drawback of e-checks is that they aren’t processed instantly, like cards are – and from a merchant’s perspective this also opens them up to fraudulent practices. This payment means is nowadays only used by some merchants, and can come with additional monthly processing fees. For the ease of use that makes for a positive user experience, however, the vendor has to set up a complex and secure system in place in the backend, in order to accept online payments. For a merchant to accept an online payment, they need to work with a payment partner. To be more exact, there’s actually a credit card network that serves as an intermediary between the payment processor and the issuing bank.

If you’re an offshore company, have very poor credit or operate an especially higher-risk business, look for vendors that cater specifically to your circumstances. This is beneficial to you because most customers should recognize and trust this platform, eliminating a potential barrier to sales. After all, you can’t blame online shoppers for hesitating https://xcritical.com/ to input credit card details into an unfamiliar gateway. When a customer swipes their card or enters their information online, the charge goes to the card issuer for approval. Once it’s approved, the issuer puts money in your merchant account, and the money can be transferred manually or automatically to your business bank account.

For consumers, completing a transaction — whether in person or online — is generally a seamless process. From quickly swiping or inserting your credit card into a point-of-sale system or entering your payment details on a website’s checkout screen, a transaction can be authorized and completed in seconds. We bring together everything that’s required to build websites and apps that accept payments and send payouts globally. Stripe’s products power payments for online and in-person retailers, subscriptions businesses, software platforms and marketplaces, and everything in between. Keep in mind that payment processor isn’t a universal term, and in some cases, it’s used with other terms like acquirer. However, it is important to note that a payment processor is not the same as a payment gateway or a merchant account.

Get started

The payment processor tells your merchant services provider or bank to credit your account for the transaction. A payment gateway, on the other hand, is the tool that transmits card data to the payment processor. An example is the EMV card reader that sits beside the register, gathering the customer’s payment information. This information could come from someone physically swiping their credit card, or from a contactless payment made via a mobile device or smart watch.