6 Payment Processing Challenges And How To Solve Them

Limited payment options

When accepting online payments, you can take funds from anywhere in the world instantly. It doesn’t 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 2024 survey found that flexible payment options are key to winning customer loyalty, and many shoppers will pay more to support small businesses.

But if you choose a separate payment processor for each payment method, you’d quickly spend 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. They can choose to pay by credit or debit card, or ACH bank transfer.

High and hidden 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. Some services charge a percentage of each transaction, while others have a flat fee. In addition, some processors have hidden fees. They charge for extra line items not initially disclosed to the business.

Solution: choose the right service

To lower your fees, start by defining your needs. When you know exactly what you need, you avoid paying for extras you’ll never use.

Before you choose, ask:

• What fees apply?
• Does it support foreign currencies?
• What customer support is offered?
• Can it support your growth?
• Which payment methods does it accept?
• How easy is the integration?

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. 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.

Fraud and chargebacks

Fraud and chargebacks are two of the biggest risks with online payments. You can limit both by using a secure, PCI-compliant processor and watching for suspicious transactions. Small businesses are extremely vulnerable to cyber fraud. Your business must protect your customers from fraudulent credit card transactions.

A chargeback is when a customer disputes a charge and the bank reverses it. When approved, the issuing bank reimburses the cardholder and debits your account. Unfortunately, recent data shows the average chargeback in the US is around $110 per transaction, and fees and staff time push the total cost even higher.

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 make sure credit card payments are processed securely, your payment vendor has to meet the current PCI DSS 4.0.1 standard.

Declined and failed transactions

Sometimes a payment just won’t go through. A card can expire, funds can run short, or billing details can be entered incorrectly. Each failed transaction is a sale you risk losing and a customer left frustrated at checkout.

Solution: give customers a clear path to retry

Choose a processor that shows a plain error message and lets customers fix the problem fast. Offering more than one payment method also helps. A shopper can switch to a bank transfer when a card fails.

Integration issues

Keeping track of incoming payments is difficult when your financial records are all over the place. Using multiple tools makes it easy to lose track of payments. Syncing everything in one place keeps your books accurate and helps you spot suspicious transactions faster.

Solution: choose a tool that syncs with your accounting software

You want your books in order and your bank account to reflect money coming in and out. So it’s important to use online tools that can sync in real time. If you use online accounting software, choose a payment processor that works with it and updates data in real time.

For business payments, you can use Melio to get paid. It syncs with top accounting software, so every payment updates your books automatically.

Technical downtime and outages

No processor is online every second of the day. When a payment system goes down, customers can’t check out. Your revenue stalls until service returns. Even a short outage during a busy period can cost you sales.

Solution: pick a processor with strong reliability

Look for a provider with a solid uptime record and clear status updates when issues arise. A backup payment method means you can still take orders if one channel is temporarily unavailable.

Why is my payment processing not going through?

A payment can fail for a few reasons, like an expired card, insufficient funds, a billing detail mismatch, or a temporary issue with your processor. Check the error message and confirm the customer’s details, then try again.

What are the most common payment failure reasons?

The most common causes are declined cards, expired cards, incorrect card details, and fraud filters flagging a transaction. A reliable processor helps you spot and fix these quickly.

How can small businesses reduce payment processing fees?

Define your needs first, choose flat-rate pricing where you can, and avoid processors with hidden fees. Some businesses also pass a small fee to customers who pay by credit card.

Is online payment processing safe for small businesses?

Yes, when you use a reputable, PCI-compliant processor that protects customer data. Keeping your tools synced also helps you catch suspicious transactions early.