The Ultimate Payment Processor Guide for 2023

Enterprise businesses need to know if their payment processor is up to the unique challenges they face. Use our payment processor guide to see if yours checks the right boxes.

The ultimate payment processor guide for 2023

Enterprise businesses like yours face a unique set of challenges. High volumes of payments in multiple markets can easily get complicated. Global aspirations may not always be supported by your current tech. And you always want to stay up to date on the latest payment trends. These challenges can leave you wondering if your current partner checks all the right boxes — and send you in search of a payment processor guide that can help you figure it all out.

What do payment processors do?

A payment processor is an intermediary between all of the parties involved in making a payment. They help businesses facilitate credit card, debit card, ACH, and other payments. Payment processors take the payment information customers input online or in-store and send it between banks, credit card networks, and the business, which verify the information and authorize the transaction. Then the payment processor finalizes the payment.

You need a payment processor in order to start taking payments for a business. But processors are more than they appear, especially for large enterprises. Beyond simply being an intermediary, your payment processor can:

• Influence your ability to accept modern payment methods, like PayPal and other digital wallets, Venmo and buy now, pay later options.
• Provide global relationships and FinTech rails that help you enter new markets.
• Affect your authorization rates.
• Help you mitigate the effects of fraud and chargebacks with advanced fraud solutions.
• Offer expertise and tools that help you stay in compliance and adapt to changing times.

Your payment processor is in a position to be a valuable partner for your business. If yours isn't doing all of the above, it could be time to revisit which payment processor is best for your enterprise.

How do payment processors work?

A payment processor will handle the heavy lifting when it comes to accepting payments. But what really goes on behind the scenes? This part of our payment processor guide goes over the five key players involved in the process.

The customer

The buying process starts with the customer. They're the ones making the purchase, providing their payment information, and ultimately clicking “buy.” Today's customer expects fast, frictionless payments and a consistent omnichannel experience across mobile, desktop, and apps. If your payment processor is too slow, doesn't approve their transaction, or doesn't have a good mobile experience, they may look elsewhere.

The issuing bank

The issuing bank (sometimes called the issuer) is the financial institution that provides the customer with a debit or credit card. The customer’s issuing bank pays your business by depositing funds in your merchant account.

The business

In order to accept online payments, your business needs to open a merchant account, which you can do either through an acquiring bank (sometimes called a merchant acquirer or acquirer) or through some payment processors, like PayPal. When a customer's payment is authorized, the funds will transfer to your acquiring bank and likely land in your merchant account within a few days. While your business is still responsible for monitoring things like fraud, chargebacks, and compliance, the advantage to partnering with a payment processor is that it makes these responsibilities easier.

The payment gateway

The payment gateway is essentially the customer-facing part of the payment process. It securely connects your website’s checkout page, where the customer enters their payment information, to the processing network. It then returns the network’s responses back to the website and the payment is either approved or denied.

The payment processor

The payment processor takes the information from the payment gateway and handles the authorization and settlement with the banks and credit card networks involved in the transaction. While some businesses use separate vendors for their merchant account, payment gateway, and payment processor, companies like PayPal can take care of all three. Having a direct, streamlined relationship with your payment processor in this way can help you improve your efficiencies and drive top-line growth in new ways.

The process

There’s a lot that goes into successful payment processing, but it’s not as complicated as it sounds. Let's go over a simple, step-by-step payment processor guide to how it works:

1. The customer makes a purchase by entering their information on a checkout page that's connected to a payment gateway.
2. The payment gateway encodes the information to help ensure it is securely transmitted across the internet.
3. The payment processor receives the information and authenticates that it is being sent by its claimed source.
4. The payment processor sends a request to the issuing bank to authorize the amount of funds needed for the purchase.
5. The issuing bank checks their records and sends back an approval or decline.
6. If the transaction is approved, the issuing bank sends the appropriate funds to the merchant acquirer. This is called settlement.
7. The merchant acquirer deposits funds in batches into your merchant account, typically within a few days.
8. If the transaction isn't approved, the business and the customer receive a notification of the decline.

Customers may expect all of this to take only seconds. It's easy to see why your choice of payment processor makes a big difference in the success of your transactions — and your business. So how do you know if yours is providing everything you need?

How to choose a payment processor

Payment processors are more than a “set it and forget it” necessity — they can be a revenue generator. Check out the infographic below to determine if your payment processor is a relic of the past or ready for the new era of payments. Then read on for a deeper dive into what really matters for enterprises.

Modern payment methods

At the enterprise level, most payment processors are going to offer credit and debit, Automated Clearing House (ACH), and the ability to process multiple currencies. But that’s no longer enough for many organizations: 57% of consumers now say that the availability of digital payment options would impact their choice of where to shop.¹ Businesses are smart to look at all of their payment method options.

• Digital wallets, like PayPal, Venmo, Apple Pay, Google Pay and Samsung Pay, let customers make fast, frictionless payments without providing card details.
• Peer-to-peer (P2P) payments, such as Venmo, allow customers to pay businesses the same way they pay their friends, as well as share purchases on a social feed.
• Contactless payments leverage near-field communication (NFC) or QR codes so customers can tap- or scan-to-pay for in-person payments.
• Prepaid gift cards are easy to send to customers via email or text and let them pay with their earned rewards.
• Dual-branded cards offer flexibility, as businesses can process these cards on whichever network is supported in their region.
• Local payment methods let customers pay the way they know and trust. They can include both real-time bank transfers, like Giropay in Germany, iDeal in the Netherlands, P24 in Poland, and Bancontact in Belgium, as well as digital wallets like Mercado Pago and Satispay.
• Cryptocurrency is an emerging payment method that may be an area for growth: In one survey, only 3% of enterprise respondents accepted cryptocurrency, but 34% were planning to support it within 24 months for online purchases.²

Buy now, pay later

Buy now, pay later (BNPL) is another important payment type due to its rising popularity. Global BNPL transactions are predicted to increase by over $450 billion by 2026³ and are the most popular in northwestern Europe, Australia, and New Zealand.⁴ There are plenty of BNPL options available, so it could be worth it to take a closer look, even if you already have a provider.

PayPal Pay Later offers several advantages that can impact a business's bottom line:

• No additional fees: It's included in PayPal checkout, meaning there's no additional fee beyond your existing PayPal rate.
• Helps drive conversion: 72% of PayPal consumers using BNPL have abandoned a purchase if PayPal was not available.⁵
• Helps increase average order value (AOV): PayPal Pay Later can increase customer AOV by 10% compared to multiple competitors’ AOV.⁶
• May drive repeat business: All generations use PayPal for buy now, pay later purchases 4X more than competing buy now, pay later providers.⁷

Frictionless omnichannel experiences

From gated checkouts and long forms to complicated payment methods and false declines, there are plenty of ways to introduce friction into the payments process. That means there are also plenty of ways to improve your checkout and delight your customers. The right payment processor can provide consistently great experiences across mobile, desktop, apps, and in-person, using features like:

• Mobile optimization, which could help you acquire the 42% of consumers who were not satisfied with mobile checkout experiences in the past 12 months (at the time of the survey).⁸
• Express checkout, like the PayPal buy button, which facilitates 46% faster checkout compared to those that do not use the feature.⁹
• Payment vaults to securely save and automatically update payment information for quick, seamless future checkout.
• Automatic billing and recurring payments for subscriptions, premiums, and more.
• Contextual commerce, which allows you to connect with partners to share seamless purchasing opportunities with your customers.

Enterprise payouts

The ability to quickly and securely send refunds, rebates, rewards, and commissions around the world is essential for many enterprises. Taking a “set it and forget it” approach gets the job done, but the best payment processors for ecommerce can help you find efficiencies and optimize your payouts. PayPal’s payout capabilities can:

• Help avoid expensive currency flips and foreign exchange fees thanks to funding abilities in more than 28 currencies.
• Quickly disburse payments to 200+ markets and easily enable payees to transfer funds in their preferred currency.
• Allow you to submit payment instructions using a secure batch transfer, easy web upload technology, or direct integration.
• Manage complex global payment regulations and compliance requirements with ease.
• Handle large payout volumes, like $2MM average monthly payouts across 42K transactions for one PayPal merchant.¹⁰

Security features

Fraud is a big deal for enterprise organizations. In one survey, the organizations represented said they lose an average of $3.7 million per year due to fraudulent online transactions.¹¹ The most common types of fraud were chargeback, account takeover (ATO), and transaction fraud.¹² Your payment processor can help with these issues by:

• Helping you mitigate fraud efficiently with embedded authentication, tokenization, 3D Secure, and compliance controls.
• Using advanced machine learning that adapts to evolving patterns in real time.
• Leveraging deep and unique data sets.
• Providing chargeback dispute resolution.

Global scale

Enterprise businesses are often looking to scale their business and reach new customers, and they should ensure that their payment processor will support their entry into new markets. A truly global payments platform provides local payment capabilities as well as support. For example, PayPal allows you to:

• Expand to over 200 markets and unlock more than 130 currencies, plus local payment methods.
• Access our network of 432+ million active global accounts.
• Leverage local banking relationships to help optimize acceptance rates.
• Contact dedicated support teams in every market we serve.

High authorization rates

Frictionless payments aren’t just about the front end customer experience. You want top-performing authorization rates on the back end to help drive revenue for your business. Using processing tools like payment vaults, account updater, and network tokenization helps keep card data fresh and accurate to drive authorization rates. PayPal’s network processed 5.6 billion payment transactions in Q3 of 2022 alone,¹³ providing us with unique data from both customers and merchants that continues to enhance our authorization process.

High availability

All those happy customers won't be able to make a purchase if your payment processor isn’t operational. When payments crash during times of high volume, like Black Friday or the first day of ticket sales for an event, so could your revenue. That’s why PayPal Braintree has a target gateway uptime of 99.95%¹⁴ and is highly reliable, even for a large enterprise with more than 60 million unique visitors per month.

Flexibility and streamlined onboarding

Enterprises don't have to settle for legacy platforms and hard-to-integrate technology that slows them down just when they need to be more agile and adaptable. Even payment processors with a comprehensive suite of solutions and massive global scale can provide flexible solutions that won’t overwhelm your team. For example, PayPal can:

• Flex to your tech stack and unique business needs.
• Use enterprise plug-ins to easily integrate with the ecommerce platforms, billing software, CRM systems, and shopping carts you need.
• Allow customization with code, APIs, and SDKs designed for developers.
• Provide streamlined payment processor onboarding that allows you to turn on what you need and keep the rest in your back pocket.
• Assign you a dedicated support team to guide you through the process via live phone support and tickets.

At the end of the day, which payment processor is best for enterprise organizations may not be the same as those that work well for small and medium-sized businesses. Look to a payment processing guide that addresses your specific challenges — and look to a payment processor with the expertise to solve them. Download this checklist for easy reference during your search, and remember, we’re always here to help.