If you’re running a small business, you’re spinning a lot of plates. For starters, you have to constantly manage your customers, employees, and inventory — in fact, your “to-do” list is pretty much never-ending. Of course, even with so many important issues demanding your undivided attention, one tops the list: maintaining positive cash flow.

Today, customers demand quick and secure payments, as opposed to more traditional methods such as paying by paper check. Payment options have multiplied over the past several years thanks to internet payments, chip cards, and wearables, such as the Apple Watch. That can make choosing among the multitude of payment options a bit overwhelming, especially when you’re trying to balance customers’ expectations with running your business.

Here, we break down how credit card payment processing works, giving you a cheat-sheet of sorts for your business. By gaining a better grasp of this process, you can make more educated choices when implementing a new payment processing solution or updating your existing services.

Securing a merchant account.

To accept credit card payments in your store, you need to equip yourself with the proper tools. Securing a merchant account is a necessary tool that you can access through a payment processing provider.

A merchant account allows you (the small business owner) to accept credit cards, debit cards, and other forms of electronic payments. A merchant account is similar to a standard checking account. Funds from the customer’s credit or debit card are transferred into your merchant account once they’re processed.

However, unlike a traditional checking account, you don’t have direct access to the funds in your merchant account. Once processed, the deposited funds will be transferred to your business’ operating account, typically within 1-2 business days.

When you sign up for a merchant account, you get access to the credit and debit card processing services, which may be provided by your bank, by a third-party, or the entity providing you with the merchant account.

Credit card processing services.

Credit card processing providers technically process the customer’s payment, hence the name. But, let’s dig into how this happens.

Shutterstock 1067303663 1When a customer presents a credit or debit card as payment at a brick-and-mortar store, the card will be run through a credit card terminal. (We’ll talk more about online stores below.) Once the card is run, the processing service authorizes, or denies, the transaction. To do this, the processing service communicates digitally with the customer’s bank or other financial institution, confirming that the funds for the purchase are available.

Once the authorization is received, the funds from the customer’s account are transferred to your merchant account. All of this happens in a few seconds, allowing you to pre-qualify your buyer.

Credit card processing services can offer several different options, including reporting, analytics, and security. For any business that accepts credit or debit card payments, the business must comply with the Payment Card Industry Data Security Standard (PCI DSS). The PCI-DSS was created by the Payment Card Industry Security Standards Council (PCI SSC), which was launched in 2006 by the major credit card brands, including Mastercard, Visa, and American Express. When shopping for a credit card processor, make sure to ask about PCI-compliance. Assuring the security and privacy of your customers’ financial data is important to protect your business from liability and ensure your success.

Having modern credit card processing services allows you to shorten the time in which you receive payment, increasing your cash flow. Additionally, card processing services can offer your customers several types of payment options, giving you the ability to showcase current technologies while simultaneously satisfying your customers’ expectations. Furthermore, with processing services keeping records of your transactions, you reduce administrative time related to manual reconciliation, allowing you to focus on growing your business.

The virtual merchant account.

As internet shopping continues to grow, you may want to consider adding an online store, if you don’t have one already.  Smartphones, digital wallets, and technologies like Alexa mean that more Americans are snow hopping on the internet than driving to a physical store. In fact, almost 70% of Americans have bought online, with 25% of adults making an online purchase monthly. Approximately 40% of Millennials prefer to browse and shop online. And just behind Millennials is Generation Z, the first native digital generation to exist.

To sell items online, you need to have a virtual merchant account. For purchasing, paying, and shipping, your virtual merchant software should embrace a seamless process. You can either install this technology on your website, integrating your credit card processing services into the software. Or, you can have a third-party host your virtual merchant software, allowing you to customize the look of your online store.

Finding the right payment gateway.

If you have an online store, you’ll also need a payment gateway, which acts as a conduit between your ecommerce website and the banks that authorize your customers’ credit card payments. 

When a customer buys an item on your online store, the customer’s credit or debit card is processed at checkout. Once the credit card information is captured, it’s then sent over the payment gateway, forwarding the information to your merchant bank and then to the issuing credit card company.

The customer’s credit card company then sends authorization or denial codes back to you, letting you know if the customer is able to complete the purchase. Although payment gateways provide standard encryption security measures such as tokenization, many payment gateways also offer additional security features such as fraud protection, giving you extra security layers.

Only ecommerce merchants need a payment gateway. However, if you’re a traditional merchant with a storefront and you want to add an online store, or if you want to integrate your sales with an inventory system, then you’ll need to add a payment gateway to your to-do list.

Payment gateways provide the ultimate flexibility for your online customers. Unlike brick-and-mortar stores, customers can shop online at any time of the day, any day of the year. Payment gateways never take a vacation or call in sick. Additionally, by offering an online store with seamless payment options, you can quickly expand your customer base, since all that is needed to shop is an internet connection. 

Not sure which gateway to go with? NAB has a number of feature-rich payment gateways to choose from

Know what to look for when hiring a vendor.

At North American Bancard, we can help guide you through the setup of a new credit card payment processing service. Our credit card processing equipment is PCI-compliant. We offer low processing fees and don’t require long-term contracts. We help make it easy to provide your customers with frictionless transactions whether they’re in-store or online. We can even integrate our systems with accounting and inventory software allowing you to save both time and money while gaining valuable insights into your business. Whether you’re looking for in-store or online credit card payments, we have the technology you need to accept payments in the modern world. We’ll help you tailor a PCI-compliant payment processing to your specific business, giving you peace of mind. To set up a consultation, contact us here or give us a call at 877.840.1952.

Contact NAB today and see how easy it is to get the merchant services you deserve.

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