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4 payment processing challenges and how to solve them

A customer paying with a credit card at a small retailer.
Adi Trudler
Published at | Updated:

Whether you sell your product or service to business customers online or consumers in a brick-and-mortar store, accepting payments is a crucial part of running a business. As the owner, you need to decide how to manage that aspect of the finances. But there are a few challenges to accepting payments. In this post, we’ll cover what they are and how to overcome them.

What’s payment processing?

Online payments are transactions that occur online, without the actual transfer of physical assets like cash or paper checks. These transactions can be done with a credit card or bank transfer and are generally managed by a digital third-party service like an app or a website.

Payment processing is a series of actions that occur when the digital payment transaction is initiated. This includes processing a card and communicating with issuing banks and consumer accounts.

To accept card payments, you’ll need a point-of-sale (POS) terminal. It first reads the magnetic strip to check for sufficient funds to transfer to the merchant, and then makes the transfer. The sale transaction is recorded and a receipt is printed or sent to the buyer via email or text.

Another way of accepting payments online is by bank transfer. To do so, all you need is a bank account that’s connected to your business. The downside is you might need to share your private details with customers.

4 common processing challenges and solutions

Let’s dive into the most common challenges you may face when starting to accept payments online—and how to solve them.

Challenge #1: Allowing payment options

When accepting online payments, you can take funds from anywhere in the world instantly, no matter where your customers are. By accepting card payments or bank transfers, you get paid quickly, regardless of physical borders.

Giving your customers more payment options opens your business to growth. But accepting multiple payment methods can be tricky. Let’s say you have a POS terminal and accept credit card payments. But your customer doesn’t have a credit card, and can only pay with a bank transfer.

Solution: Choose software that allows multiple payment options

A 2021 survey has shown that the convenience of payment options is the second most important factor when supporting a local business—customers care about it more than about refunds, discounts, or coupons.

But if you choose a separate payment processor for each payment method, you’d quickly find yourself spending more time on accounting than on running your business. That’s where a multiple-channel payment solution comes into play.

If your customers are other businesses, you can use Melio to get paid. You’ll receive a secure bank transfer, and they can choose to pay by credit or debit card, or ACH bank transfer.

Challenge #2: High fees

Generally speaking, you can’t process credit card payments without using a third party service. Most of those tools have a high transaction fee. The fee usually depends on the number of transactions you make or their value. Meaning some services charge a percentage of each transaction, while others have a flat fee. In addition, some processors have hidden fees and charge for additional line items not initially disclosed to the business.

Solution: Choose the right service

To make sure you save on fees, first you should define your needs. That way, you make sure you’re getting what you look for, and pay fees that are actually required. Some things to consider include what fees are there? Does the service support foreign currencies? What kind of customer support does it offer? Can it support your growth? What payment methods does the service accept? And what is the integration process like?

Another thing you can do is pass on fees to the customers. It doesn’t matter if the fees are calculated per transaction or monthly—the numbers really pile up. And adding a small fee to cover the cost can go a long way for your business. Don’t forget to be transparent and let customers know that the fee only applies when using a credit card.

Challenge #3: Fraud and chargebacks 

While online payments have many benefits, they raise concerns about information security. Small businesses are extremely vulnerable to cyber fraud and your business must protect your customers from fraudulent credit card transactions.

Another risk that comes into play are chargebacks, which occur when a customer disputes a charge. When approved, the issuing bank reverses the charge, reimbursing the cardholder and debiting the business’s account. And unfortunately, these can cost businesses between $20 and $100 per transaction.

Solution: Data security

The most effective way to protect your business and clients from fraud is by ensuring data and payment security. How do you guarantee that as a small business? Choose a reputable, secure payment processing solution. If you want to ensure that credit card payments are processed securely, your payment vendor has to be PCI compliant.

Challenge #4: Integration issues

Keeping track of incoming payments is difficult when your financial records are all over the place. If you use multiple tools to process payments from different sources, you may find yourself in over your head and lose track of where payments are coming from. Losing track of payments can also mean you miss a suspicious transaction which may alert you to the fact that fraud has occurred.

Solution: Choose a tool that syncs with your accounting software

To make sure your books are in order and that your bank account reflects money coming in and out, it’s important to use online tools that can sync in real time. If you use an online accounting software, choose a payment processor that works with it and updates data in real time.

For business payments, you can use Melio–which integrates with top accounting software–to get paid. This means that all your invoices and transactions are synced between the systems, and every payment you receive via Melio is automatically updated in your accounting software.

Process payments the right way 

Processing payments is one of the most important aspects of any business that is looking to succeed. And while it may be challenging, if you put in the time and do the research, you can end up offering your customers the best checkout experience possible.

*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.