Whether brick-and-mortar or online, an essential part of opening a new business involves figuring how customers will pay for their purchases. You can choose to handle this yourself by receiving cash the old-fashioned way or setting up an account for electronic transfer. But before you do so, there are two things you need to remember.
First, COVID has changed the way people pay for products and services. While cash is still widely accepted, people fear that it’ll help spread the disease (though recent studies suggest otherwise). According to the April 2020 bulletin by the Bank of International Settlements in Switzerland, this pandemic has accelerated the adoption of cashless modes of payment.
Second, there has been a spike in cybersecurity attacks throughout the pandemic. Phishing scams, dubious domains, and email scams, to name a few, have been running with near impunity since the lockdowns. If it’s this easy to lead people to click on a suspicious link, it can also lead them to send money to the wrong merchant.
New businesses today no longer have the luxury of meeting customers in person. The system will need a more secure and efficient way of transferring payments from customer to merchant, which is where payment processing comes in. Here’s a closer look into the system and why it’s decisive in doing business in this day and age.
Beyond Customer and Merchant
As it turns out, in settling payments, there are parties other than just the customer and the business involved. A traditional setup can also include their respective banks, whether both share the same or work with different banks. Bridging the gap is the payment processor and its gateway of choice, creating a pipeline of sorts to ensure the cash gets where it needs to.
Chances are you’ve already seen how they work, seeing at how you’re also a customer to an extent. At one point, you’re hesitant about employing one because of the revenue you stand to lose in payment processing fees. For example, in PayPal, you can lose up to 4% of the revenue for every purchase in such costs. Sometimes, the customer shoulders these fees, which can turn them off.
To make payment processing more attractive, services like NADA Payments work in a ‘win-win’ setup. Neither customer nor merchant will be charged extra for the transaction, only fees prescribed by their respective banks. This system works for both credit and debit cards.
The customer only pays the actual price, and the business gets 100% of the profit. Everybody wins in just a matter of six steps.
- The customer uses their credit or debit card to make a purchase.
- The gateway encrypts the data before delivering it to the processor.
- The processor verifies credit with the customer’s bank.
- The customer’s bank either approves or declines the purchase.
- The processor receives the decision and shows it to the customer.
- The processor issues funds to the merchant or their bank if approved.
Why Consider One?
As you’ve probably realized by now, there’s plenty of data involved in processing payments, and the system only has minutes to get it done. Online stores, which have increased in number amidst the pandemic, rely on the system’s speed and accuracy to deal with thousands of transactions. This wouldn’t be possible if customers were still paying in cash.
The pandemic isn’t the only reason, though.
- Talk on Digital Currency
New and existing businesses in this day and age must consider the economic trends either emerging or being fast-tracked due to COVID. One such trend is digital currency, which is cash in electronic form. It differs from payment apps since you have money on your e-wallet instead of promising to pay later.
Implementing digital currency is still years away, even in pioneering countries such as China. But once it does, your physical cash register won’t be able to store electronic money. You’ll need a payment processing system to handle the enormous amounts of data that’ll come with it.
- More Consumers Buying Overseas
Speaking of China, global accessibility is another reason to consider payment processing services. It probably won’t be an issue for businesses limited to the domestic market, but those with buyers worldwide should think about it. A 2016 Nielsen report found that 57% of consumers have bought stuff from overseas retailers.
Imagine someone from Germany buying from your online store; he or she will most likely pay in their local currency. You don’t have the convenience of converting U.S. dollars into Euros or vice-versa. Payment processing already has that part covered, as the banks have real-time data regarding foreign exchange rates. Conversion comes almost automatically.
- Attracting Impulse Buyers
Lastly, allowing credit or debit card payments is like catnip for impulse buyers. By providing them this option, they’ll be more confident about buying a product or service now and paying for it later.
There won’t be a shortage of impulse buyers anytime soon. A 2019 study published in the Journal of the Academy of Marketing Science discovered that 62% of in-store purchases were made on a whim, with more impulse buying occurring in online stores.
Final Words: Leap of Faith
For the record, coins and bills will still be around for as long as countries still consider them legal tender. Given recent events, new and existing businesses have to adapt to the entering and exiting trends, even if it entails taking huge risks.
The fact that payment processing is incorporating technologies, like artificial intelligence, is enough evidence that it’s slowly becoming the norm. New rules and regulations will be in place in a matter of years, making the system more secure and less prone to error than before. Convenience is now a factor and the business that can make the most seamless customer experience wins.
Incorporating a payment processing system into your business may not come cheap, but its benefits will pay off in the long term. For one, your business will be more shielded against a future pandemic or a new wave of cyberattacks.