Entrepreneurs face many decisions when starting a business. Choosing a payment platform is one of the most important ones simply because it allows a business to collect payments from their customers. With myriad choices available, payments have become complex. As a start-up merchant, where in the world of commerce do you begin?
First of all, what is a payment platform?
A platform can pertain to many things, from your computer’s operating system to Google and Facebook software, to smartphone apps. Basically, without the IT speak, a platform is the computer hardware or software structure upon which other systems are built. Some platforms are ready-made, some provide different functionality and restrictions, and some are open to innovation.
A payment platform connects businesses to their customers and allows payment transactions to occur. With a payment system, a business can including cash and electronic checks. A payment solution can be housed in a , a mobile POS (mPOS) system, or an online payment system. It can include different types of functionality, depending on the needs and complexity of your business. Some payment platforms are web-based and allow a merchant to build an eCommerce site based on templated themes.
Another type of payment platform––and one that is common among brick-and-mortar businesses––is one that is built into a physical point of sale (POS) system. This type of payment platform includes , as well as features to help streamline various business functions such as accounting, inventory management, ordering, and analytics. An “open” payment platform allows developers to create apps for a variety of specific business functions necessary to a particular industry and business type. Apps themselves could be considered platforms when they are used as a tool to operate the business.
Whatever payment platform you choose, one thing to pay close attention to are the the platform offers. Today’s consumers expect that their payment data will be secure during any payment transaction, whether it’s conducted in-store, off-site, or online.
Who can help you set up a platform to accept payments?
A common way to set up a platform for payments is by enlisting the help of an Independent Sales Organization (ISO). An ISO can be an individual or an entire organization, and resells products and services from one or more payment processors. Acquirers (or acquiring banks) contract with ISOs to procure merchant accounts and build and maintain the relationship between merchants and the financial institutions.
ISOs are matchmakers, so to speak, or middlemen, that assist merchants with POS system set up, tech support, and developing relationships with acquiring banks as well as payment processors and card associations, such as Visa and MasterCard.
Some ISOs offer more services than others, and some might even be acquirers themselves. Beyond facilitating payments, many ISOs provide services such as selling or leasing payment terminals, providing customer service, and nurturing ongoing relationships between all parties in the payment process. The best ISOs offer industry expertise to help merchants obtain the right payment system to meet specific business needs.
For businesses that opt for a particular type of eCommerce platform, such as Shopify or Wix, an ISO isn’t necessary because all the systems are already in place.
How does the payment process work?
Here are the 8 steps to understand a payment transaction:
- A customer initiates a purchase at a by swiping or inserting their credit card, or tapping their smartphone for a mobile payment using a digital wallet.
- The merchant’s system sends the transaction information to their acquiring bank.
- The merchant’s acquiring bank sends the information to the credit card network (Visa, MasterCard, American Express, Discover, etc.) for approval.
- The credit card network send an authorization request to the customer’s card issuer.
- The card issuer approves (or declines) the request and sends the response to the credit card network, which send the response to the merchant’s bank, and finally to the merchant’s POS system.
- If the authorization is approved, a hold is placed on the funds until the transaction is completed.
- After authorization, a settlement occurs between all parties.
- The funds are then transferred to the merchant’s business bank account.
The entire credit card transaction itself takes only a few seconds, while it can take longer for final settlement, depending on the payment platform that is used, and the payment providers involved in the process.
What’s the right payment platform for your business?
When choosing a credit card processing platform for your business, planning is key. Consider what your business needs in terms of payments today. Then, consider what your payment needs may be in the future. For example, are you selling only in-store now, but want to expand online later (or visa versa)? Are you selling based out of one physical location to begin with, but have plans to open other locations as your customer base grows? How you answer these types of questions will help you determine the type of payment solution you ultimately choose.
Whether your business plan is simple or more complex, you’ll definitely want to consider working with an ISO or experienced partner who can assist with setting up your payment platform, as well as all the necessary relationships to facilitate credit card transactions. Your ISO can also be a trusted partner for the long term to help you make wise decisions about payments acceptance.
The payments world has truly become a payments universe. Before you launch your business, make sure you’re fully prepared by researching your payments options and choosing the one that will work best for you.
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