The best payment processor for a small business

The best payment processor for a small business will depend on the business and its specific requirements; however, there are features you need to look out for when choosing a payment processor. 

A reliable payment processor should offer secure and seamless transactions, protecting sensitive customer information. Secondly, it should provide a range of payment options, including bank payments which are more cost-effective than card payments. Finally, transparent pricing structures, responsive customer support, user-friendly interfaces and flexible integration capabilities are all essential for small businesses. 

If you run a small business, there’s nothing more important than ensuring you get paid for the goods and services you provide. On one level, this might be a case of invoicing correctly and having a system for chasing late payments. 

However, for many merchants, the digital revolution means that they can trade anywhere in the world via a website, and for cash flow to be maintained, a business of this kind needs an effective and efficient online payment collection process. 

Before considering the best payment processor for a small business, it’s important to understand what a payment processor does and how your business might use one. 

What does a payment processor do, and why your business needs one

A payment processor facilitates transactions between two parties, such as a merchant and a customer, by transferring information from the customer's bank account or card issuer to the merchant's bank, ensuring a successful payment. They come into play when a customer provides their payment information through a payment gateway or physical terminal, verifies the data, conducts anti-fraud checks, and requests transaction approval from the issuing bank. 

Beyond simply processing transactions, payment processors offer services like reporting tools for sales tracking and advanced fraud protection. They often assist in setting up merchant accounts and special bank accounts that allow businesses to accept credit and debit card payments. 

7 reasons why your business will benefit from a payment processor

• Accept various payment options (bank payments, credit and debit card payments)

• Facilitate online sales

• Improve cash flow

• Enhance security

• Offer convenience to customers

• Provide reporting and analytics

• Handle currency conversion (for international transactions)

There are two basic options to consider when deciding on the best payment processor for a small business, as follows:

• A transaction processor, which charges a fee per transaction (via cards or bank accounts)

• Merchant account, which sets a monthly fee, but charges less per transaction

Ultimately which option you go for will depend on the requirements of your business. For example, e-com, hospitality or retail businesses will likely need to accept the high fees and failure rates associated with card payments due to a payer preference for these payments. Others, such as B2Bs, sole traders and many subscription businesses, may find bank payments more cost-effective and convenient.

In some cases, the best payment processor for a small business might involve a full-scale Point of Sale (POS) system, which, as well as processing payments, manages the inventory for your business, deals with cyber-security matters and helps with issues related to compliance. When it comes to the best payment processor for a small business, we’ve reviewed some possible options for you.

GoCardless

GoCardless is a massively flexible payment processing option, making it easy to take both one-off and recurring payments from customers. By utilising the power of bank payments, open banking and payments intelligence, GoCardless can save your business time and money, making it easier to get paid on time and keep customers happy. 

Using GoCardless to set up ‘pull’ payments authorised by your customer and controlled by your business allows you to automate payment collection, eliminating late payments and reducing manual admin. With lower fees and high payment success rates, GoCardless allows you to collect more for less.

PayPal

PayPal is one of the most widely used payment processing options based on its ease of use. It can be used without having to pay a set-up fee and is available in the following options:

• PayPal Checkout

• PayPal Web Payments Standard

• PayPal Payments Pro

There are no monthly fees for a small business, and the transaction fees vary depending on the sales volume. Many shopping carts utilised by websites are designed to accommodate PayPal. However, it can also be used as a standalone option, with merchants able to email a payment button code to their customers.  

Sage payment processing

Sage payment processing is a card processing gateway that integrates seamlessly with any existing Sage accounting software and popular e-commerce platforms. In addition to payment processing, Sage offers extras such as one-click checkout, payment pages which can be customised, security options and fraud screening tools. 

It also allows for gathering analytics and data reflecting more comprehensive business performance. Using Sage as the payment processor for a small business involves paying a monthly fee which varies depending upon the volume of sales being processed.  

Stripe

Stripe has become a popular option for card payment processing which offers a cloud-based solution flexible enough to offer fraud prevention, analytics and in-store as well as online payment processing. 

Stripe is an excellent option for businesses that trade globally because, like GoCardless, it offers automatic conversion from currencies worldwide. The charges for Stripe involve a percentage charged per transaction as well as a processing fee. 

Authorize.net

Authorize.net provides two different options:

• All-in-One option, which doesn’t require a merchant account and comes with a monthly charge and processing fee

• Merchant account gateway, which has much lower transaction fees

It also includes tools such as anti-fraud filters as standard and Customer Information Management tools which can be added for a small additional fee. 

PaySimple

PaySimple offers flexibility and options such as automated billing and marketing options. It can be set up to take payments online, in person or via a mobile phone, and the 14-day free trial makes it easy to find out if it is suited to your business. 

PaySimple comes with a card reader to enable in-person payments and a virtual terminal, and it can be set to take recurring payments and one-off transactions. It comes with a monthly fee and processing fees, plus extra charges for additional features. 

Summary

Choosing the best payment processor for a small business involves considering several factors, including: 

• security, 

• the range of payment options, 

• payer experience

• cost-effectiveness, 

• transparent pricing, 

• integration capabilities, 

• customer support, 

• user-friendly interfaces.

Depending on which factors are more crucial for your business, you will choose a processor that fits those criteria. For example, a big choice is between payment methods such as card payments or bank payments.

While cards are popular, the overwhelming majority of people have a bank account, and as bank payments are cheaper, require less admin and can be automated, they often represent a good choice for many businesses.

Case study

BizWisdom, a digital marketing agency based in Melbourne, has seen significant benefits from implementing GoCardless for its payment processing. According to the Founder and Director, Sam McEwin, chasing invoices and late payments was a time-consuming distraction that hindered the agency's growth and diverted the team from its core mission. 

Implementing GoCardless for payment processing has been a game-changer, virtually eliminating the need to chase unpaid invoices. About two-thirds of the agency's customers now pay via GoCardless, saving the team significant time and effort.

Key Insights

• Improving efficiency: For BizWisdom, GoCardless has streamlined the payment process, reducing the time spent on invoicing, chasing late payments, and reconciling accounts.

• Better customer experience: The introduction of GoCardless and payment collection automation has improved the customer experience and offers a more seamless interaction due to the integration with Xero. Sam notes,

• Positive impact on growth: GoCardless has enabled BizWisdom to focus more on providing quality service, which drives business growth. This growth has resulted in more job opportunities, helping the company to retain its talented team. Sam confirms,

We can help

Selecting the right payment processor for our business is a crucial decision that can significantly impact your success. GoCardless can help if you require a payment solution that automates payment collection, reduces administrative work, and operates domestically and globally.

With GoCardless, it is quick and easy to get started, and with no contracts and no long term commitment required, there’s no risk. You can set up payments in the merchant dashboard in just a few clicks, and GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can connect to GoCardless via over 350 partner apps, such as Xero and Quickbooks.

With the ability to manage one-off or recurring payments efficiently, GoCardless can streamline your financial process and help ensure smooth transactions with minimal admin. 

Frequently Asked Questions - FAQs

What payment method is good for small businesses?

For small businesses, bank payments are a highly suitable payment method. This method includes BECs Direct Debit and allows companies to collect payments directly from their customer's bank accounts, reducing the risk of late or missed payments.

In addition, bank payments tend to have lower transaction fees than credit card payments, an essential factor for small businesses looking to reduce costs.

How do I set up a payment system for my small business?

Setting up a payment system for your small business using a service like GoCardless involves a few steps:

1. Create an account on the GoCardless website. GoCardless offers a pay-as-you-go model with no contracts or long-term commitments required.

2. Add your business details and bank account information, which will be used for receiving payments.

3. Create payment plans and schedule payments, making it ideal for recurring payments. 

4. Customers can then sign up for these plans using a secure online form, after which payments will be automatically debited from their bank accounts according to the schedule.