Payment processing in 2019: everything you need to know and how to get favorable terms
So, you have an idea for your own business, which includes payment acceptance. One way or another, without paying by bank card (usual Internet acquiring) you be successful. In addition, there should be extra-features like one-click payments, alternative payment methods, but all this rests on one question — who will process the payments? Asking this question more or less seriously, many come to another question — how payment processing works in general, what’s the critical points, with whom to work (and from whom it is better to stay away), etc. I decided to write an article about this topic — fortunately, I gained some experience in payments over the years of managing the LeoGaming team.
How does payment processing work?
Payment by card / mobile balance seems simple. Well, touch/ insert the card into the POS-terminal or enter the card in the acquiring form. Click, confirm the payment by sms or push, receive a receipt for the email.
Well, first of all, there is a card issuer, and by that I mean not Mastercard / Visa / Union Pay / payment system, but Oschadbank, Privat, FUIB etc. The bank that issued the card interacts with the payment systems to process the payment between the merchant banks and the card issuing banks. After that, the bank takes a merchant fee for accepting cards.
Now on specific examples. You’re a merchant. You accept the card / wallet balance, online or offline, and your bank collects money for transactions. Then, the acquiring bank or non-bank acquiring company transfers information about this card to the issuing bank via payment processing. When tour customer enters card data on your site, they are encrypted and sent to the card issuer to pay for the request. Not all banks in Ukraine have processing, especially not all fintech companies that work with the acquiring service. LeoGaming has it in view of the specifics of our work with a huge number of transactions for online games.
What does the commission consist of?
The commission consists of a transaction fee for the payment system, fixed fees (acquiring commission) and unforeseen expenses. The first is from the card type and transaction type. Each category has its own rate, this is normal. The difference, as you can guess from the above, is in the risks for the business. For example, data entry, a niche subject of payments increases the commission, thereby justifying the costs of support work, protection from fraud. Parameters for controversial transactions a huge amount: the amount, frequency, number of payments, etc.
The second is the fixed processing commission, here comes our company. This is a fee for using the service. Commissions may also differ: large projects pay a certain percentage (the larger the project — the lower the percentage), small ones are charged with a guaranteed minimum fee, because they may not collect the required number of transactions.
Third — unforeseen expenses. It depends on any extras you may be obliged with, so I won’t stay here. You just need to remember that they are.
What about payment processing fees?
And most important part, this is why you probably opened this article. Each company calculates tariffs as it wants — that’s what the market is about. The basic criteria are the planned number of transactions per month, the branch of the project and the risk level of payments. It can be 1.5%, 2.0%, 2.5% or even 3.5% — large processings have a fixed tariff scale, however, it’s suitable for working with standard projects, most often with small ones. If you work with a large business, then you need to create an individual offer, on the basis of which to form your tariff. At the very least, our team leads a personalized approach to large customers, and this gives positive business results.
How to get favorable conditions for payment processing?
A small lifehack about when the percentage of the acquiring company is lower. This is, alas, very pragmatic and reputational question. First, you need to be «big». A large, profitable project that guarantees a large number of transactions always reduces the percentage of service and saves money. Secondly, the work of the non-banking transactional business — besides technical resources — is also a complex financial institution. Financial companies with a regulator’s license are seriously controlled and must comply with a variety of requirements for conducting their business. Because the clearer and more transparent the business is, the better for all participants.