How To Choose Your Payments Processor?

Posted by Checkbook on Feb 05, 2020

After a stagnant forty years, the payments industry began to transform in the last decade. Startups in the FinTech space identified an opportunity to move an otherwise stationary industry and started doing so in the direction of speed, efficiency and security.

A decade hence, these FinTech firms are rapidly changing mindsets and setting precedents for what will be considered an ‘ideal’ payment experience. Firms that are looking to upgrade their payment methods and bite into this metamorphosis, now have the luxury of choosing between some exemplary services.

Here is where the rubber meets the road - how do you pick the right one for you?

Knowing which parameters to assess a firm against when shopping for the ‘right’ payments partner is essential to making a decision that will be an optimal solution for your business. Understanding that this decision must be based on and customized to the needs of your business is key.

Recommended parameters to look into are:

Product Portfolio - When choosing a payments partner, it is imperative to look at the payment products a firm offers and match it with what you are looking for. Ideally, the more products a firm integrates into their system, the more bang for the buck they will offer. To shop amongst payment products like ACH, Wire Transfers, Digital Wallets, Real-Time Payments etc., you must perform an internal audit to evaluate how your recipients like to be paid and what infrastructure they have for accepting payments. Choosing a payments partner that would present the recipient with multiple encashment options would increase your business’ appeal.

Geographic Reach - Aiming to partner with a payments provider that has its footprint in all the markets your business operates globally is essential to building and cultivating long-term relationships. Finding such a partner would not only lead to centralization of global payments data but also help in limiting the need for dealing with multiple partners. If your business is a global one, choosing a multinational payments partner is a no-brainer. But if your business is national or local, choosing a smaller partner that has local know-how and market share might be the smarter thing to do.

Customer Portfolio - The first step to evaluating a payments processor’s customer portfolio is to understand the market segment they are catering to (B2B, B2C, C2B, P2P). Identifying which one applies to the relationship between your senders and recipients helps eliminate irrelevant options. The next step would be to look at who a payment partner’s existing customers are. If existing customers belong to the same industry as your business, you can conclude that the option in question is equipped to manage your needs. If existing customers belong to a different industry, engaging with the payment partner in question may be an opportunity to give your business competitive advantage.

Deployment Options - A payment system can be used in a multitude of ways. Some users may need a white-labelable solution to integrate with their current website while others might want to use an app to initiate transactions. Based on the way your business wants to integrate its payment partner on its platform, you need to select a vendor that offers the desired deployment method.

Pricing Structure - Pricing is key when choosing a payments partner. A number of different factors have to be taken into account when comparing and evaluating pricing - Would the sender assume the financial burden of the payment or transfer that to the recipient? Would both the parties prefer a percentage based fee or a flat fee? Would both the parties prefer to have the fee levy on the transaction amount or the transaction volume? For example, a business sending thousands of payments would rather partner with a payments provider that offers volume discounts. Performing an internal audit of your firm’s payment characteristics is the first step to choosing a vendor right for you.

Aside from delving deep into the parameters recommended above, it is always a good idea to also add some (though a lesser degree) of importance to other variables as well. This would include faith in payment provider’s leadership, user-friendliness of the system and access customer support or exhaustive FAQs.

Changing your payment method is a big decision and a lot of research must go into why you are opting to do so and who you’d like to go with. But finding the right long-term partner can be a game-changer in your growth story.

About Author: Shreeya Agarwal