As online shopping continues to grow, many businesses are looking to incorporate more streamlined online payment processing on their websites and digital stores. Before you get started, it’s helpful to know the three Ps of payment processing: Players, Payments and Pricing.
There are three main players when it comes to processing credit and debit card payments, whether online, over the phone or in person. On one end there’s you, the business owner or merchant. On the other is your customer. And in between, there’s a lot of technology that connects you.
As a business owner, it’s helpful to understand exactly how money moves from your customer to your business. There are two stages to payment processing: the authorisation (approving the sale) and the settlement (receiving the money).
The authorisation process goes roughly like this:
And that all happens within a second or two.
The second piece of the process (where you get paid!) is the settlement:
The settlement process can take a few days. Sometimes your bank will let you access the money before it’s even sent to them. They might also keep a portion in your account that you can’t touch, just in case the customer returns things later (called a reserve in payments speak).
As you’ve probably guessed, everyone who touches the transaction gets paid, including the issuing bank, the credit card association (Visa, Mastercard, American Express, etc.), the merchant bank, the payment gateway and the payment processor.
At its most basic, every time you process a sale transaction, you pay 4 fees:
The first 3 fees (the percentages) are usually all added up together and quoted as a single rate, while the transaction fee is quoted separately (e.g. 2.6% + $0.30).
To make things even more complicated, most pricing structures generally fall into one of 3 categories:
With this little bit of extra knowledge up your sleeve, you can build a plan for payments that works best for you and your business.
Simply complete the form to receive valuable info and actionable tips for your business. Plus, you’ll hear from fellow merchants who use PayPal to help reach their goals.
We'll use cookies to improve and customise your experience if you continue to browse. Is it OK if we also use cookies to show you personalised ads? Learn more and manage your cookies