Most of us have heard the phrase, “cash is king”. But for small business owners these days, payment processors are the Ace—as non-cash payment preferences continue their prolific rise. According to new research, Gartner expects that 80% of B2B sales interactions will occur on digital channels by 2025.

In order to remain competitive, small business owners need an efficient, reliable way to process non-cash payments. But not all payment processors are created equal. So how do you choose the right one for your business?

We’re sharing everything you need to know about payment processors so you can feel confident in your selection.

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In this post, we’ll cover:

What is payment processing?

Payment processing securely facilitates digital transactions for businesses. In short? It authorizes digital payments made by customers—ranging from credit cards, debit cards, electronic-transfer funds, digital wallets, and more.

The most important thing to note about payment processing is while it’s generally a seamless, instantaneous transaction, the system it’s built upon is quite complex. Payment processing relies on a network of third-party vendors from financial institutions, technology providers, and regulatory agencies to function.

What is a payment processor?

A payment processor is the solution that handles these digital transactions for businesses. It acts as the liaison between the business and all the third-party networks to make this complex process seamless.

HubSpot’s payment processing partner Stripe provides this high-level overview of how it works:

  1. The customer initiates a digital transaction.
  2. The transaction information is submitted to a payment gateway which authenticates and transfers payments in a secure manner.
  3. The payment processor receives transaction authorization from the payment gateway and then forwards the details along to the bank for approval.
  4. The bank verifies the customers’ account information and provides a transaction approval or denial, called an authorization response.
  5. If approved, the transaction and therefore the sale is complete. At the end of each day, the business pushes a batch of approved transactions through the payment processor to request funds from the financial institutions. Funds are issued along with ongoing reconciliation and reporting.

What are the most popular B2B digital payments?

Digital payments continue their surge in popularity, reaching $9.5 trillion in 2023. When we look specifically at B2B, below are the most common digital payment methods:

  • Credit Cards: Still a tried and true B2B digital payment method (also most popular for recurring charges or subscriptions)
  • ACH credit transfer: A process where the B2B customer issues a payment from their account
  • ACH debit transfer: The business automatically pulls the payment from the B2B customers’ account
  • Wire transfers: Electronic funds sent between bank accounts

How to Choose a Payment Processor

While all payment processors execute the same functions, the way they go about doing so differs. Here are the varying components of payment processors, so you can choose one that aligns with your business needs:

  • Cost: While industry rates for payment processing are fairly standard, it’s still important to evaluate them along with any setup and recurring service fees to understand the total cost.
  • Ease of Integration: Just like your customers, you also want a seamless experience. Understanding if your payment processor offers an out-of-the-box checkout product is worth noting for small businesses with limited resources.
  • Customer payment options: Offering a wide variety of payment methods is essential to minimizing cart abandonment, so choose a payment processor that offers multiple payment options. Something else to note—if you sell globally, considering a payment processor that supports local payment methods is crucial.
  • Security and compliance: Data breaches are increasingly more common and can wreak havoc on small businesses. Customers expect a secure transaction, so it’s crucial to select a payment processor that follows best practices for fraud protection and is compliant with the Payment Card Industry Data Security Standard (PCI DSS).
  • Speed: Your customers want speed. Select a payment processor with the reliable, best-in-class technology to deliver on that seamless experience.

Common mistakes to avoid when selecting a payment processor

Now that you understand payment processor features to look for, let’s discuss what to avoid. Below are some common mistakes businesses make when selecting a payment processor that leaves them frustrated and regretting their choice:

  • Not considering full scope of needs: Payment processors offer different features, so it’s important to understand your full scope of needs. Do you just need payment processing or do you also need billing features like invoicing, subscription management, and more? Ensuring the payment processor you select has every tool you need will ensure you’re making the cost-effective choice, and will avoid headaches down the road.
  • Not evaluating settlement speed: Securing funds as quickly as possible is critical to the livelihood of many small businesses. If this sounds like your business, make sure you understand how quickly it takes your payment processor to transfer funds to your bank account.
  • Not prioritizing customer support: If you’ve read this far into the blog, you now understand how complex the world of payment processing is. Keep your focus on running your business rather than taking a crash course in payment processing by choosing a partner with great customer support.

Choose a payment processor with your future needs In mind.

When starting out, small business owners may think of payment processors as a means to an end. But the reality is, your payment processing partner is an important business relationship that will help you prosper and thrive long term. Use this guide to choose a payment processor that not only fits your needs today, but can grow with you tomorrow.

Now that you know all the elements of a best-in-class payment processor, it’s time to choose one. Here are the 15 Best Credit Card Processors for Small Businesses.

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