Businesses accept payments in many ways, which facilitate their cash flow. Many contract- or invoice-based businesses receive money through wire transfers or automated clearing house (ACH) payments. They may not need credit card processing.
Recent research by the Federal Reserve shows that just 16% of transactions in 2024 were done in cash. That number is down from 20% in 2021 and projects to continue declining. Businesses that sell directly to customers through a point-of-sale service, like retail stores and restaurants, and companies that sell products or services online need a payment processor. Americans are simply carrying cash less and using credit cards or online payment tools more.
What to Consider When Choosing a Payment Processor
Entrepreneurs have many options when it comes to payment processing for small business. The best payment processor for one business may not be the best for another. There are a number of considerations to bear in mind when choosing between payment processing companies.
Fees and Pricing Structure
Payment processing companies make money by charging processing fees on each transaction. Fees generally range between 1% to 5% of the transaction amount. If you’re selling in large volume, those percentage-based fees can add up fast. Alternatively, some payment processors may offer flat transaction fees.
On top of fees, many payment processing companies also charge monthly fees, like a subscription cost. Typically, processors that charge monthly fees have lower transaction fees, but not by much.
Ease of Use and Integrations
There’s a good chance you’ve been selling products already without a payment processor, so you want to ensure any new payment systems for small business fit into your existing model. Seamless integration with your bank account, website, e-commerce platform, and point of sale system will ensure you don’t miss a beat while getting set up. Likewise, you’ll also save a headache if your payment processor integrates with your accounting software or customer relationship management system (CRM).
Payment Methods
How will your customers pay you? How many locations do you need to accept payments? Restaurants are increasingly letting diners pay at their tables, meaning they need many more payment gateways. A clothing store probably only has one or two point of sale systems in a central location. A small dog food company may focus primarily on selling online, while supplementing the e-store by setting up at farmer’s markets.
Every business has a different sales strategy, which will impact what kind of payment methods you need to accept. The most popular payment methods today are credit and debit cards, e-wallets, and mobile payments. You’ll want to find a company that supports online payment processing for small business, as well as the payment options your customers most often use.
Customer Service
If a payment processor glitches or stops working, you can’t sell your products. That’s very bad for business. The best payment processing for small business is payment processing that works. While the top companies have reliable tech, you’ll want to verify that their customer service is reliable, too. Should a problem arise, you need to be able to reach customer service and have it resolved quickly.
Top Payment Processors for Small Businesses
The best payment systems for small business can make your life easier and help your company grow. We breakdown some of the top options below.
Square
One of the most popular choices for small businesses due to its flat-rate pricing and no subscription fee, Square offers user-friendly features to help small business owners. Square’s payment processing supports both online payment processing and POS systems to support business that make both online and in-person sales.
Square doesn’t have any early cancellation, activation, refund, or chargeback fees, making it very appealing for small businesses working on thin profit margins.
Another cool perk? Square offers free POS software and includes a free mobile device card reader to support in-store credit card processing.
Pricing:
- 6% plus 10 cents for in-person transactions
- 9% plus 30 cents for online transactions
- No monthly fee
Stripe
Another company known for flat-rate pricing, Stripe is one of the best online payment processors for small business. Stripe’s features are tailored to e-commerce and retail companies, offering both virtual and physical terminals, integrated invoicing and billing, and a wide range of platforms and extensions to work with your business’s existing tech tools.
Stripe also accepts payment in 135 currencies, making it a great choice for small businesses making international sales.
Pricing:
- 5% plus 30 cents for in-person transactions
- 9% plus 5 cents for online transactions
- No monthly fee
PayPal
PayPal is a giant that more or less paved the way for online payment processing. Today, PayPal supports online payment processing for small businesses, charging customers with invoices, and in-person payments. It’s a versatile payment processing solution that lets small businesses accept credit and debit cards, contactless payments like Apple Pay and Google Pay, and PayPal direct payments.
One bonus of using PayPal is that if you also implement their traditional payment solutions like PayPal Checkout and PayPal Payments Standard, you’ll pay lower fees.
Pricing:
- 29% plus 9 cents for in-person transactions
- 89% plus 49 cents for online transactions
- No monthly fee ($5/month for Payments Standard, $30/month for Payments Pro)
Shopify
One of the best online payment processors for small business is one of the world’s largest e-commerce platforms. Shopify is a comprehensive e-commerce solution that’s uniquely suited to helping online businesses thrive. Primarily known as a platform to build online stores, Shopify also hosts stores and processes payments. Payment processing for small business is a breeze if you’ve already built a Shopify store. (Even more so when you consider that using outside processors incur extra fees.)
Shopify payment processing offers 24/7 customer support, fraud analysis, shipping discounts, and support for dozens of currencies.
Pricing:
- 4-2.9% plus 30 cents per transaction
- Starts at $29/month paid annually
Helcim
Helcim is a merchant services provider that uses an interchange-plus pricing model, which means your business saves when a customer uses a card with low interchange rates. Not only that, but Helcim also offers discounts if you process more than $25,000 monthly, making it a good choice for businesses that are growing rapidly.
Helcim provides mobile device processing, a POS system, a virtual terminal, and integrated merchant accounts.
Pricing:
- Interchange fees, plus 0.3% of total transaction cost, plus 8 cents for in-person payments
- Interchange fees, plus 0.05% of total transaction cost, plus 25 cents for keyed transactions
- No monthly fee
Conclusion
Every business needs to find ways to get paid for products and services as efficiently as possible. Payment processing for small businesses is a vital consideration for any entrepreneur.
Whether your business needs to accept credit card transactions in-person or process online payments, there are many payment processing tools to support your business.
The best payment processing companies can support your business operations from point of sale through accounting challenges, making it easier to collect payments and manage your finances.
FAQs
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What is a payment processor for small businesses?
A payment processor is a company that allows businesses to take digital payments. This includes credit and debit cards, mobile wallet payments, online payments, and more.
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How does a small business use a payment processor?
Every small business may use a payment processor in different ways. For instance, a food truck may use a payment processor at a physical point of sale terminal while set up at a music festival. A small business that sells phone chargers online may only use a payment processor on its e-commerce website. A small business that sells clothes in both a brick-and-mortar store and online can use a payment processor in both places.
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What are the top online payment processors for a small business?
Two of the leading online payment processors for a small business are Shopify and PayPal. Shopify makes it very easy to build an online store and accept online payments, while PayPal offers many digital payment solutions to support online businesses.
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What are the top payment processor providers for a small business?
Some of the best payment processors for small business include Square, Stripe, PayPal, Shopify, and helcim.
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