With the exponential growth in the digital marketplace comes a dire need for more user-friendly payment processing services that offer transparency and security.
For instance, businesses are reworking their entire payment process and building the infrastructure needed for seamless digital payment channel integration.
The same goes for banks as more clients now rely on online payments and expect their bank account to become their portal into the digital world. That being said, there’s no better time to join the financial industry and start an online business.
Starting your payment processing company can initially seem overwhelming, especially in such a competitive market.
So with proper planning, thorough market research, and secure payment gateways, your company can stand tall among other credit card processors and make unimaginable profits.
Follow along as I explore the best strategy for launching your own payment software. I know that there is a huge market for this since I used to own a credit repair company and had to deal with payment processing.
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What Is A Payment Processing Company?
Let’s catch you up to speed and ensure newcomers to the payment processing business know precisely what they’re getting themselves into.
For starters, a payment processing company acts as the intermediate between the bank accounts of a business owner and a customer.
It’s not financially feasible for small businesses to develop their own digital payment solutions. So, if a business wants to accept payments other than cash or check, they need a payment processor to take care of transferring money from digital channels.
This includes credit and debit cards and the ever-growing digital wallets.
To put it in plain terms, a payment service provider takes over the payment authentication process.
This is made possible by using secure tokens to communicate with the credit card’s issuing bank and take on the transferred amount to acquiring banks.
Payment Gateway vs Payment Processor
The best payment processing software is the frictionless one, doing all the heavy lifting in the background without alerting the end user to its existence. This is the way technology has to be: simple, reliable, and non-intrusive.
However, make no mistake, a payment processing company needs a complex infrastructure to make your payments by simply clicking a button.
The payment processing industry relies on two systems that inherently feed towards the same function but couldn’t be more different.
The first half of the story has to do with a payment gateway, which is the interface where shoppers input all their credit card information on a merchant’s website. Customers won’t have faith in a credit card processing business unless they’re positive their data remains secure.
So, here comes the role of a payment gateway as it encrypts the credit card info and keeps it from prying eyes. That’s not all. The system operates as an online point of sale (POS) that checks the validity of the credit card and gives merchants guarantees that the payment will go through.
On the other hand, your credit card processing company can specialize in providing payment processor services. This involves comparing the buyer’s card data against a network of cards and their respective issuing banks. Once the payment processors get a match, they mediate money transfers from the customers to the merchants’ bank accounts.
In other words, payment processors serve as mediators between the card’s issuing bank and the online store’s account. They’re responsible for everything that goes after payment authentication to the movement of the paid amount between different accounts.
The Two Different Types Of Starting A Credit Card Processing Company
Now that you understand the main premise behind a payment processing company let’s break down the different business models and many moving pieces that go into launching a successful payment service provider.
There are two ways you can break through such a competitive industry and have your own business up and running. The first involves building the payment software from scratch. At the same time, the other business strategy relies on buying an already existing payment processor and adding some tweaks here and there in what is known as a white-label solution.
For the first business plan to be feasible, you need a big development team with experience under its belt in software building. But still, expect to invest more time and resources in server infrastructure and security appliances to develop payment software ready for launch.
On the other hand, a white-label approach should save you time and money as the core product is already there. All you have to do is take care of some business logistics like registration, contracting reliable payment providers, opening a merchant account, and fostering strong relations with key business partners.
The Steps To Starting Your Digital Payment Business: Your Business Plan
To ensure your business takes a market share out of the existing credit card processing companies in the area, you need a well-researched business plan that sets you apart from the competition. Follow along as we walk you through our step-by-step guide on how to start a payment processing company with a prospective vision!
Research the Payment Processing Market
Having some insight into the local market trends can be pretty useful when putting together what goes into your payment processing company. You need to do your homework and conduct thorough market research to ensure you have a competitive edge from the get-go.
For instance, knowing how many retail businesses are in your area and what payment processing solutions they’re going with can help paint a picture of the market expectations. You can also conduct a survey asking what services business owners want from their go-to merchant services provider.
Data is power, and this can’t be more true here! Your credit card company should win over potential clients, provided you can undercut the competition or deliver more value. Understanding your clients’ needs ensures you’re doubling down on the areas that matter the most!
Identify Resources Needed
In addition to the ready-made software responsible for payment processing, your company needs a team of sales and marketing experts. You need to treat your credit card processing company’s human resources with respect to ensure they don’t jump boats and join the competition.
You can compensate your full-time employees with a salary base or commission, or both! Furthermore, you can have independent contractors when needed to promote your workforce without the same contractual obligations.
The sales team is responsible for reaching out to local merchants and winning them over. Your salespeople must highlight your company's payment processing activities and how you offer higher value than other payment service providers.
On the other hand, the marketing team of a payment company is essential for business development, especially in this time and age. Such a team cements your company’s online presence and explores different marketing channels, including printed materials, social media ads, and physical marketing campaigns.
Obtain Licenses & Permits
The financial industry is one gigantic machine, where each cog operates harmoniously with the others to push the market forward. As an outlier, you need to forge strong business relationships to cement your business as an integral part of the segment.
Understanding government regulations and falling under industry compliance rules can save you tons of headaches down the line. We can’t stress how important it is to found your payment processing business on sound legal grounds.
You can always get professional advice and review your state laws before checking significant milestones off your business plan. For instance, a PCI DSS or Payment Card Industry Data Security Standard certification must qualify your payment processor as a legit business. Without professional guidance, it might be tricky to secure such a license.
On a separate note, as a payment service provider, you need to partner with a bank to underwrite credit card payments. As a matter of fact, any bank will do, as the prerequisite here is offering Visa and Mastercard support, which is pretty much every single bank out there!
That’s not all, and your bank will also be responsible for interbank routing between the customers’ accounts and the merchants’ acquirer banks. This is taken care of for small interchange fees, or as small business owners call it: a swipe fee. Choose a bank offering a partner program to get better rates and skip the setup fees altogether.
Find Necessary Equipment
Securing server infrastructure and equipment needed for customer information encryption and safety is the next step in your journey for starting a credit card processing company. That’s not all, and you also need to provide payment terminals for your clients.
Before you do this, it's important to have a good credit score and know that you can leverage the best deals from suppliers.
Early during the registration process, ask small business owners how they prefer to pay for their credit card terminals. Some can afford to drop the full price upfront, and others prefer to lease their payment processing equipment for an affordable monthly fee.
Either way, you should have a strong partnership with a leasing company specializing in cutting-edge equipment and, more importantly, can deliver bulk orders in time. This way, you won’t risk losing potential customers because the payment terminal didn’t ship on the estimated delivery date.
Build Out Your Website
Next up is fleshing out your credit card processing company’s online presence. Social media accounts are fine, but having your own business website can take your company to the next level.
My blog has allowed me to make money from home, and I highly recommend creating a website for your business. Build it out with comprehensive product descriptions, informative blog posts and reviews from real customers. Plus, providing forms on your website makes it easier for customers to get in touch with you without needing to call or email.
First, you must go through trademark registration and secure a domain name shortly after. This way, you’re in full control of your brand’s image and can set the tone for how your clients perceive you as a payment service provider.
You can have your in-house development team take on the responsibility of launching the website of your payment business, or you can reach out to independent contractors to take on such a task.
If you choose the latter option, remember that you have to secure an ongoing relationship with web developers to ensure your website is up and running and your online clients have a bug-free experience.
Build Relationships with Vendors
Even if you don’t want to hire your own workforce on day one, you can always fall back on a trusty Independent Sales Organization (ISO) to provide trained sales representatives.
Your agents’ expertise is of utmost importance here as they are the first point of contact between your emerging brand and local vendors. Once you have enough merchants on board, you can rely on their word of mouth to bring in other small business owners from their social circles.
You can offer some benefits like lower fees, discounts, and more for successful referrals to incentivize your loyal customers to help you grow your credit card processing company.
Test & Launch Payment Processor
If your credit card processing software is still in its infancy, running it through functional testing is wise. This monitors how the software behaves when handling orders, making calculations, and processing payments.
It’s also recommended to test your system’s integration with your chosen payment gateway. The security firmware might decline valid transactions, and you can’t take any chances.
While testing, you can follow the entire transaction work frame, starting from placing an order to receiving the payment in the market acquiring account and finally to whether the deposited amount can be refunded.
Of course, testing won’t be complete before testing the security of your credit card processing business. Clients entrust you with sensitive information like their credit card numbers and sometimes even personal data. You must ensure your encryption models are operating as intended and that the data can’t be interrupted and decrypted.
Before launch, you can also make sure your system is stable and can handle high-volume traffic without major performance issues. Clients are coming to your website for their business needs and won’t want to put through with a janky, slow interface that keeps them from reviewing a payment process.
Scale Your Business
Congratulations, your credit card processing company is up and running! Now, it’s time to set your eyes on your next goal and think of ways to grow your business and make it more profitable. A scalable business model ensures that your company has the infrastructure needed for growth and that your payment processing services can reach more vendors.
With proper planning, the cost of expanding your ongoing business will be far less than the profits it brings in. Such a winning equation begs you to pursue all opportunities for growth and encourages you to push your business aspirations even further.
A payment service provider makes money through commissions for credit card payments. A payment business can bring in anything between $28,000 to $34,000.
Whether it turns into a side hustle or full-time business, you can’t walk away from such figures and miss your chance to start a payment processing firm.
Yes, but not without its fair share of investment. You need to build the payment facilitator infrastructure with solid security features. Also, a Customer Relationship Management (CRM) system is required for the smooth management of transactions and clients’ information.
Yes, credit card processing services are regulated by both federal and state laws. Your business must abide by the e-commerce regulations, follow the cybersecurity framework act, and pass data protection prerequisites.
If you’ve been on the fence about starting your own payment processing company, you have no more executes now! The need for reliable credit card processing services is at an all-time high, and the admission cost can be as high or low as you would like it to be.
For instance, you don’t need to build new software from the ground up. Instead, you can white-label a tested processor and start your financial independence.