Payment Processing Part 2

How to Choose a Payment Processor – Does It Have the S-Factor?

The ten S's to take into consideration when choosing a payment processor, and why they're essential for a good business

This article was written by Stuart Ballan, Head of Sales, Middle East, at Counting House. He has over 25 years B2B experience, spanning gaming, payments, eCommerce, financial products, and more. For the last 7 years, Stuart has been immersed in the payment processing industry. He’s had many diverse articles published, and is a published book author.

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Stuart Ballan
Stuart Ballan

It seems my first article of this Series, “Payment Processing: Is Aggregation a Traffic Accident Waiting to Happen?”, created quite a stir. In addition to triggering a panel on the same subject at a recent conference, it created a tsunami of core questions related to advice on criteria for choosing a payment processor.

Even though from a distance, many payment processors might look the same, under a magnifying glass, whilst some clearly overlap, you’ll soon see that others are diametrically opposite, whilst many are somewhere in between.

Check out a payment processor’s Security, Stability, Standards, Staff, Service, Systems, Settlement, Solutions, Self-Sufficiency, and Sanity, to see if they have the S-Factor.

  1. Security & stability

Payment processors are collecting, and/or sending your and your customers’ (traders’) money, on your behalf. So first and foremost, any merchant (broker) should check, and feel very comfortable that a payment processor is secure.

How long has the payment processor been in business? If they are relatively new, what might that mean, including, do you have good reason to believe they’ll be around ‘tomorrow’?  How financially stable are they?  Does Google have anything to say about them? What value do they add, as a new payment processor, that exceeds that of more established payment processors?  What experience do they have in the payment processing industry? What experience do they have processing payments in your industry?

Does the payment processor process industries you don’t want to even hear about, and if so, could that risk the stability of the processor, and therefore of your funds, and the future service they’ll provide?

  1. Standards

Is the payment processor regulated, and if so where, and meeting which standards?

Is it a big negative for you if working with a regulated payment processor means the application process takes a little longer?

Stop to think for a moment why a regulated payment processor has perhaps stricter merchant (broker) onboarding procedures than an unregulated one. Regulation protects the merchants (brokers), and by doing so acts in the interest of their customers (traders). In the same way a regulated (eg CYSEC, FCA) broker has to be financially strong, has strict policies on how it operates, has stringent requirements on information it must record, and is open to regular external audits and checks, a regulated payment processor sings from a similar hymn book. Talk to a CYSEC regulated broker, and they’ll complain about the overhead of reporting to the regulator, but they wouldn’t be without it, as regulation has not only become the industry differentiator, but also, the trend.

Yes, a regulated payment processor might drill down deeper under the rug to see if there’s polish or dust underneath. Yet, they are motivated and driven to identify and weed out the apples that are really lemons, the salt being sold as sugar, and ‘merchants’ looking for channels to change the colour of funds, gained from sources we normally only see in the movies.

By protecting the public from the less-desirable merchants, regulated payment processors also protect all of their own merchants (brokers).  Why? Because one bad apple in a barrel can have devastating effects on all the apples, including risking the reputation and stability of the payment processor, and the risk of having payment processing services that you might be using withdrawn because of the activity of the bad apples, that regulation should have helped filter out.

Being attracted by a payment processor’s rapid, ‘no questions asked’ onboarding process is a myopic approach, and unquestionably, yet another accident waiting to happen.

  1. Staff

People buy from people they like.

So, how many staff does the payment processor have, and where are they located?

Who will you work with on all sales/business aspects, what did they do previously, are they local, and if not, can you expect to meet them at industry conferences?  Can you find them on LinkedIn?  If so, what can you learn about their relevant (and irrelevant!) history, and if not, well, why not?  Anonymous or ‘ambiguous’ people, responsible for your and your trader’s money?  Let’s be serious.

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  1. Service

I’m never going back to that restaurant.  The service was terrible”.

We flew DreamAir, and the service was exceptional”.

We all understand the value of excellent customer service in our daily lives; returning to what we liked, and giving a wide birth to what we absolutely didn’t. So why is it, that when choosing a payment processor, some merchants (brokers) are so immersed in the lowest price, and getting processing as soon as possible, that they don’t stop to think about the level of client service the payment processor offers?

Payment processing is all about money, and when you have questions, and can’t get quality, quick answers, people are going to get upset- very upset. You haven’t received a large payment from your trader. The trader wants to start investing, you want him/her to start investing, but his money hasn’t yet appeared. You sent money to your affiliate or supplier, but it’s not arrived, and the temperature of the calls from the beneficiary is increasing by the hour. Your relationship with your affiliate/beneficiary might be at risk (they have other choices), and you need answers, and you need them now.

You should only settle for a payment processor that offers no less than the best in class client services.  What level of telephone support will they give you?  When you call, will you talk to an anonymous call center, or to the same people every time, so that they get to know your business, and you get to know them?  How experienced are the client services staff, because if the payment processor has a high staff turnover, you’ll be training them, rather than the other way round.

Regarding email support, how quickly do they reply, and are their replies quality replies, that help you make decisions?

And let’s not forget language.  It should be a given that the Client Services team is fluent in English. Can they also communicate in other languages, so, for example, French merchants (brokers) don’t need to be fluent in English, in order to enjoy the same high quality of support?

  1. Systems

What systems does the payment processor have in place, for example, in the form of a quality back office, to enable you to see at a glance the money they have collected and/or sent on your behalf?  Can you drill down (query) to transactional level, can you meet your needs, and can you produce/export useful reports from this back office system that you can use internally, for a wider audience?

What are the operational processes for payments being collected or sent, what systems (technology) will you need to, or have the option to, use, and are those systems acceptable to you?

  1. Settlement

How often is the payment processor willing to settle funds that they collected on your behalf, to you? If it’s more than a week, does their explanation make sense, or is there perhaps a hidden reason?  Global interest rates are at an all time low, and it makes no sense to conclude a payment processor wants to hold on to funds to make a bit of interest. Payment processors make far more money when the funds move, via transaction fees. You’ll find some food for thought on this in my first article of this payments series.

  1. Solutions

Of course, you need to assess what payment solutions each payment processor offers, and if their products and services really meet your needs.  I’m not talking just about what the marketing brochure says. Drill down. Ask the questions, and question the answers.

  1. Self-Sufficient

How self sufficient is the payment processor, or in other words, what third parties does it rely on to provide its payment products and services to you, and what risks are involved that such third parties could withdraw their services, either by choice or otherwise? If the payment processor provides its services to other, less reputable payment processors, or to industries you’d prefer to file under ‘F’ for Fiction, could the activities of the latter risk them being able to provide those services to you, in the future?

  1. Sanity

And finally, once you’ve done all your research, make a final sanity check. Talk to other merchants using this payment processor, using the points raised in this article as a checklist to qualify them.

  1. Summary

Selecting a payment processor is selecting a partner. It’s a business marriage. People get engaged before they get married, in order to figure out if the marriage is right. If you leave the decision on selecting a payment processor to the last moment, and/or you don’t ask the right questions, don’t be surprised if it ends in divorce, leaving behind a trail of damaged business, disgruntled traders, negative press, and ruined reputations.

Invest some time to check that in addition to having the Solutions you need, a payment processor is Secure and Stable, meets the highest Standards, has excellent Staff, offers best in class client Service, is sufficiently Self-Sufficient, has valuable Systems, and Settles quickly, all supported by independent Sanity checks.

It’s not an accident that I didn’t discuss Price, anywhere above, and it’s not because there’s no equivalent word starting with the letter ‘S’!  On the contrary, if the lowest price is important to you, you’re going to have to give up most of the above, because excellence costs money.

Whether you do or do not watch the X-Factor, when you’re reviewing or selecting your payment processor, make sure they’ve got all 11 components of the S-Factor.

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