Third Party Payment Processors; Pros and Cons

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Accepting online payments isn’t just a nice option for your customers — it’s a feature nearly all your customers expect and even require in order to do business. About 230 million people shop on the internet every year tallying up roughly $4.9 trillion in retail sales, many processed by a third party payment processor. By 2023, that number is expected to nearly double. If you’re not accepting online payments — or if your system is outdated, cumbersome and difficult to use (for you or your customers), your business is going to suffer. Plus, there’s a really good chance your competitors will be taking note of these changes in consumer behavior and taking full advantage.

The problem is, opening an individual merchant account is a costly proposition for many smaller and medium-sized businesses. Fortunately, third-party payment processing offers an alternative to the traditional merchant account “system” — an alternative with significant advantages for your business.

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Third-Party Payment Processors: First, the “Pros”

  • Lower price: It’s no secret that merchant account setup and operational fees can be costly. For many small- and even medium-sized businesses, those costs can take a big chunk out of profits. Third-party processing is a lot less expensive to set up and to maintain, making it a welcome choice for businesses with their eye on the bottom line.
  • No monthly fees: Merchant accounts charge a monthly “subscription” fee for the businesses who use them, and most charge a batch of other fees, too, like per-transaction fees, payment gateway fees and compliance fees. In many cases, discounts only apply to businesses with the highest sales volumes, leaving smaller businesses paying a premium for their merchant account services. Third-party payment processors, on the other hand, are much less costly to use on a regular basis, especially for smaller and medium-sized businesses that don’t qualify for volume discounts.
  • Simple setup: The merchant account setup process can be frustrating and time-intensive, requiring plenty of paperwork and verification before you’re up and running. By contrast, third-party payment systems feature a simple, quick setup that lets you focus your time and energy on running your business.
  • No monthly minimums: Many merchant accounts require their customers to process a certain number of transactions each month in order to maintain their accounts and contain their costs. With a third-party processor, there are no minimum transaction requirements, making them a great choice for businesses of all sizes and all types.

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Now for the “Cons”

The primary drawback of using a third-party payment system? Right now, they’re not as well-known as the more traditional merchant account services, which means they may not be as appealing to some customers, especially those in the baby boomer or Gen X generations. For millennials and Gen Z, though, using third-party processors like Zelle, Venmo and PayPal is pretty much second nature. These tech-savvy consumers grew up with computers and online shopping, and their purchasing and payment behaviors will certainly be driving the future of online shopping.

For businesses, the cost of processing individual transactions can be higher than transactional costs associated with merchant accounts. However, with the introduction of more third-party processing companies, those fees have come down, and with higher future demand, they’re poised to become even more affordable. Security features have also improved, providing both businesses and their customers with the essential peace of mind they need to do business online with confidence and ease.

Let Payline Help You Stay Competitive — and Profitable

At Payline, we offer complete POS systems to help businesses of all sizes thrive and succeed in an ever-more-competitive business landscape. Our system offers seamless integration and state-of-the-art security, along with scalability that helps your business grow. Don’t let merchant account drawbacks keep you from giving your customers what they want. Schedule a call with Payline and learn how we can help you get started with a free month today.

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