6 Factors for ISVs to Consider When Choosing a Payment Processor
Whether your software platform services accountants, doctors, retailers, or gyms, your organization will need to process consumer payments. There are a variety of ways to pay for goods and services, but some of the most popular include credit cards, debit cards, ACH (Automated Clearing House) and mobile / digital wallet payments.
When it comes to choosing a payment processor for integrated or embedded payments, ISVs should consider several factors. These will include how you want to accept payments (in-person and/or Ecommerce), what types of customers you are serving, your business size and more. Today we look at how each of these help determine the type of payment processing model to choose.
As a first step, it’s important to consider what types of transactions your merchants will accept. Transaction types can include in-person payments, online payments (also called Ecommerce payments), keyed payments, contactless payments and payments made with a mobile phone (whether tapped or in-app).
A mobile payment solution might be necessary if you want to accept payments outside of your storefront – for example, at an event or a festival. If you’re launching an Ecommerce page, look for a payment processor that offers secure online transactions and accepts all major credit cards, as well as ACH, particularly if you are in utility or government payments. Also evaluate whether they support recurring billing for subscriptions and card-on-file payments.
More consumers than ever are adopting electronic / digital wallets, so it’s important that your potential processor supports GooglePay and ApplePay for in-person tap and both in-app and web-browser. These e-wallets make payments a snap for the cardholder since they can easily select which card they want to pay with, and they don’t have to key in their card each time they want to make a payment.
Payment Processing Pricing
Some processors may be very transparent on transaction pricing for smaller merchants, but in other situations, such as enterprise, government, and education, pricing may be quite complex. What’s worse is that some processors will force the go-to-market (GTM) price on the ISV, making them uncompetitive with other options in their marketplace. Setting the GTM price for the merchant should be a cooperative process with your payment processor, since ultimately neither party wins if the merchant chooses a competitor’s software because their embedded payment option costs less.
The total cost of payment processing is made up of a number of fees, including interchange fees, transaction fees, monthly fees, chargeback fees, and less obvious costs such as membership fees, setup fees and Payment Card Industry (PCI) compliance fees. You should consider the one-time fee and the monthly costs when comparing services, since most modern embedded payment acceptance offerings do not charge monthly fees or PCI non-compliance fees.
Transaction fees can vary depending on what types of cards your merchants are accepting (debit vs. credit cards, consumer vs. commercial cards, etc.), where the transaction is taking place, whether the transaction is made in-person, over the phone, or online, and more, but the typical cost is between 2-4% per transaction and is highly dependent on the vertical. Your payment processor should provide you pricing unique to your vertical, since the major card brands offer many programs that have lower back-end costs for certain verticals such as charity, government, education, insurance and services.
|Pro Tip: With Payfactory, you get credit card processing services at different price points and risk levels to fit your organization's budget and business needs.|
A payment terminal, also called a payment device, and associated applications are necessary if you will be processing in-person credit card payments. The terminal should accept magnetic stripe cards, EMV chip cards and contactless payments – and could also be countertop, mobile or a combination of the two.
If considering a mobile payment terminal, ensure that you can use it across iOS and Android devices, while also accommodating mobile card readers with the option to enter payment data on the fly manually.
For both countertop and mobile payments, ensure that the payment processors you are evaluating support your preferred technology and card acceptance method. Otherwise, you might have to pay extra fees or settle for less functionality than expected. We strongly recommend choosing a processor that offers your merchants fully PCI-validated P2PE (point-to-point encryption) to protect the cardholder and mitigate breach risk. For many larger entities like government, education and healthcare, PCI-validated P2PE has become a requirement on their RFPs.
While some processors offer payment processing and point-of-sale (POS) systems, the two do not have to work together. A POS system is excellent for processing card transactions, but it can also track and store cash payments, track inventory, generate sales reports, integrate with accounting software and much more.
If you want to combine credit card processing and POS options, evaluate the equipment required and the cost. You may also be able to keep an existing POS system with your new payment processor if it is compatible with the processor’s current integrations.
Merchants expect the funds processed from a card to be deposited into their bank account as fast as possible. But in the traditional payment processing model, the soonest you might get your funds is by the end of the next day. And most of the newer, trendy processors take a minimum of two business days to deposit funds. You should choose a processor that can offer true next-day funding or even next-morning funding like Payfactory does for certain verticals.
|Pro Tip: Payfactory offers fast payouts and deposits. For example, transactions closed in the evening can be deposited the next morning for approved industries.|
No discussion about payment processing would be complete without considering security for your customers’ transactions. Any business that processes payment transactions must be PCI compliant, but security goes beyond PCI and should include technologies such as encryption and tokenization for payment card data.
Encryption and tokenization replace actual payment card data with letters, numbers and symbols that would be meaningless to a fraudster. This ensures that if your system is hacked, no valuable information is found that can be resold on the Dark Web or used to commit fraud.
There are various types of encryption and tokenization solutions depending on how you are accepting payments, so make sure to ask potential processors about their internal security systems and the security vendors that they use. We also strongly suggest that you work with a provider that offers 3D Secure 2.x for your digital transactions (Ecommerce, mobile, etc.) in order to shift liability for chargebacks and disputes back to the card issuer for fraudulent purchases.
|Pro Tip: Payfactory is one of the only payment facilitators to provide the option of PCI-validated point-to-point encryption (P2PE), the highest level of security for card-present transactions.|
Get the Right Payment Infrastructure for Your Business
At Payfactory, we empower ISV platforms and their merchants with fast onboarding, payment acceptance and payouts through restful APIs. We offer competitive rates with no monthly fees, all backed by top-notch customer service, an easy application process and transparent pricing. Security is also at the core of our platform, with our CEO, Ruston Miles, serving on the PCI Board of Advisors and architecting leading encryption and tokenization solutions for payments and sensitive data.
Contact us today to get a free consultation on how Payfactory can take your payment processing to new levels.