What are direct credit card processor solutions, and should store owners go out of their way to work with such solutions? Generally, credit card processing companies include any payment processor with direct access to credit card networks, such as Mastercard, Visa, Discover, and American Express. Since they work directly with these networks, they also process transactions themselves.
Meanwhile, third-party processors like Square, FattMerchant, and HELCIM enter a contract with a direct credit card processing company that can do the processing for them. They also leave the front- and back-end services to direct processors as well. That said, third-party vendors can add exclusive features and bonuses to the processing solutions they offer clients.
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Some of the top direct credit card processing providers on the market include:
CMS runs private front- and back-end services through JP Morgan, which allows them to work directly with credit card brands like Visa and Mastercard. Square contracts them to process their credit and debit card transactions.
Worldpay is a reputable, widely known traditional financial institution founded. They have been providing in-house front- and back-end credit card processing solutions to various clients and third-party credit card processing providers since the 90s.
Global Payment, Inc. is a reputable corporation that has been providing front- and back-end credit card services since the 60s. They receive very minimal complaints despite catering to millions of clients globally.
The company was formerly known as First Data Merchant Services and was recently acquired by FISERV in 2019. They power more than six million retail stores, ATMs, POS devices globally.
An Independent Sales Organization (ISO) serves as the middle man between the merchant and the acquiring bank. They are responsible for providing front-end services that transfer transactions from the merchant to the issuing bank, and back-end services to credit the funds to the merchant's acquiring bank. ISOs also bring in clients for acquiring banks.
An acquirer refers to the merchant's bank account wherein the issuing bank transfers the processed funds to, while a credit card processor is the party that verifies, processes, and sends credit and debit card payments made through the merchant's POS device, card terminal, or payment gateway.
When looking for a credit card processing solution to work with, businesses need to consider the following:
Reports show that most SMBs that do not accept credit card transactions forgo getting a credit card processor because of the high expenses. For most SMBs, card processing fees can eat up a lot of their profits. This issue especially applies to those who sell high-volume, low-cost goods with small profit margins.
To prevent these issues, look for a payment processing company that follows a predictable, straightforward pricing plan. That way, you can always prepare for the costs.
In the credit card processing industry, it's common for credit card companies to lock their clients in with a one- or two-year contract. As a merchant, you can freely enter these agreements without worrying. However, if the conditions come with high early termination fees, you might want to consider other card companies instead.
The best credit card processing providers don't just process payments. Look for a complete card processing solution that not only allows you to accept card payments but also streamlines and automates various parts of your daily business operations.
It's no exaggeration to say that businesses that still don't have payment processors yet are losing massive potential profits. In fact, statistics show that the eCommerce market currently has more than 2.14 billion online shoppers and that 40% of all POS transactions in the past year consisted of card payments.
Any business owner can start accepting card payments by getting a credit card processor. Business owners need point-of-sale POS devices for in-store transactions, while online transactions require the use of a payment gateway.
Do you have a small business that sells low-cost goods? Processing Card explains that different payment processors offer varying features, so you cannot blindly use the same options others do. Check out our guide on the best payment processors with the lowest rates.
One way to charge customers card fees is by adding a line on the invoice with an item called "credit card surcharge" and calculating it at standard rates. If you have your system set up correctly, this can be done automatically without any manual effort.
You can also ensure that such surcharges are processed smoothly by setting them as automated charges against each customer's account when they place their order.
Credit card companies make the bulk of their money from three things: interest, fees charged to cardholders, and transaction fees paid by businesses that accept credit card transactions.
Avoid processing your own credit card through a merchant account that you are affiliated with. You should also avoid paying someone else when it's not necessary because this can be considered fraudulent and money laundering—both of which are considered strictly prohibited by card companies.
Banks have a lot of different reasons for declining transactions, but the most common reason is that they don't think you can repay them or their line of credit will be damaged by approving your purchase.
A declined payment could also be due to insufficient funds, frozen account status, invalid credit card number inputs, or lapses in the card's expiration date.
The cardholder presents the merchant with a card for payment. Visa then sends back to the issuer an authorization response, either approving or rejecting the transaction. These messages are sent on encrypted channels and cannot be intercepted by anyone other than those that have access to them, such as store owners, issuers, and law enforcement agencies if needed.
Should you look for direct processors? Direct card processing service providers process credit and debit card transactions themselves since they work directly with a card network. Plus, they run their own front- and back-end services. However, direct processing services are only one of the many factors that merchants should consider when shopping for payment processors.
That said, third-party vendors offer extra features and programs to clients who get their merchant services. Most of these aren't even available anywhere else. Ideally, business owners should look for the best card processing company based on their specific needs and preferences. Do not limit your options to direct processors.
Having trouble understanding how payment processing companies work? Processing Card has multiple resources explaining what goes behind a processed transaction. Check out our article on direct processor companies to learn more!
