Guide on how to set up online payment processing for small businesses

PayPal Editorial Staff

PayPal Editorial Staff

February 21, 2023

Woman wearing glasses sitting at her computer and checking invoice

Your business is registered, your e-commerce website is active, your products are stocked, and your customer service department is on standby. But what about your payment processing system? The success of your online business starts with making smart choices about payment processing.

But first: What is online payment processing, and why is it so important? Online payment processing refers to money moving from your customer to your business—which is how you get paid!

Setting up a reliable online payments system can help ease the process of checking out for customers. After all, you don’t want customers to fail to check out simply because you didn’t offer them a convenient way to pay.

By partnering with an online payment processor, you’re giving customers more ways to pay and allowing them to choose what works best for them.

How to set up online payment processing

We know you may have questions swirling in your head: What is a payment processor? What is a payment gateway? How can I set this all up without losing my mind?

Here’s the good news: How online payment processing works isn’t as complicated as it may appear to be. Setting up online payments starts with finding the right partner, creating an account with a payment processor like PayPal, and integrating it into your operation.

What to consider when setting up payment processing

Choosing the right payment processing for your business involves some important decisions. To begin, it’s necessary to understand the three Ps of payment processing: players, payments process, and pricing.

  • Players. There are three main players when it comes to processing credit and debit card payments, whether online, via phone sales, or even in person. On one end is you, the business owner or merchant. On the other end is your customer. In between is a lot of technology that connects the two of you, such as the payment gateway and the payment processor.
  • Process. 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 authorization (approving the sale, which usually happens within seconds) and the settlement (getting the money in your account, which can take a few business days).
  • Pricing. There are several fees associated with payment processing, charged by each of the players, including the issuing bank, the credit card association (Visa, MasterCard, etc.), the merchant bank, and the payments processor.

Benefits of online payment processing

From increased customer trust to secure, seamless transactions to merchant protections, you can take advantage of numerous benefits when you partner with an online payment processor, including:

  • Convenient, secure transactions: A payment processing partner can help you safely and securely complete transactions via end-to-end encryption between your business and your customer.
  • Quick response times: Payment processing generally takes a few seconds, helping you complete transactions quickly and efficiently. The money then appears in your merchant bank within a few days.
  • Additional protections: The right payments partner can also give you access to various seller protections, from chargeback protection and dispute management to fraud protection and data-security compliance coverage.
  • Happy customers: Shoppers expect more ways to pay—and that can be achieved with the right payment partner. From debit and credit card payments to social payment apps and even options like Pay Later, online payment processing gives customers flexibility, which, in turn, can lead to happier, more satisfied, and more loyal customers.

The cost of payment processing

As you may have guessed, these benefits come at a price. There are various costs associated with online payments, collectively called payment processing fees. These merchant fees typically include the following:

  • Interchange fee: The customer’s payment issuer gets paid by taking a percentage of each sale. This fee varies depending on various factors, such as industry, sale amount, and type of card used.
  • Assessment fees: The fee charged by the credit card association (Visa, MasterCard, etc.).
  • Percentage fee: Your merchant bank takes a cut by charging you a percentage fee. The amount here also varies by industry, amount of sale, monthly processing volume, etc.
  • Authorization fee: The payment processor (who might also be your merchant bank) makes money by charging this fee every time you process a transaction (whether it’s a sale, a decline, or a return). Plus, it can charge fees for setup, monthly usage, and even account cancellation.

Payment processing with PayPal

Accepting payments from online customers requires the right partner. There are many available payment processing options to choose from, including PayPal.

Sign up for PayPal to offer your customers payment processing. Learn more about payments with PayPal.

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