The payment industry has been expanding rapidly in recent years. Since 2018, the total value of online transactions has consistently risen, surpassing $4.2 trillion. Reports indicate that over two billion people worldwide shop online. The COVID-19 pandemic and subsequent lockdowns further accelerated this trend, leading to a sharp increase in digital transactions. A large portion of these purchases is processed through credit and debit card payments.

These statistics highlight that even small businesses can secure a steady share of online sales and payment processing opportunities. As a result, merchant service providers play a crucial role in handling transactions for a large segment of online shoppers, requiring them to support multiple payment channels efficiently.

Small businesses may not process the same high volume of online transactions as larger corporations, but they still encounter a variety of obstacles when utilizing online payment systems.

1. Ensuring Data and Platform Security

Small businesses often have limited control over data security when processing payments, as customer information is typically entered on third-party platforms. However, if a security breach compromises personal or financial data, the responsibility and repercussions often fall on the business.

To protect customer information, it’s essential to work with a payment processor that complies with PCI DSS (Payment Card Industry Data Security Standard) regulations. Trusted providers like Square ensure PCI compliance. Before partnering with a processor, request proof of relevant certifications, licenses, and adherence to security protocols to safeguard sensitive data.

2. Limited Integration with Existing Systems

Online payment processing shouldn’t operate in isolation—it should integrate seamlessly with other essential business systems like accounting, ERP, and CRM platforms. However, these integrations often come with high costs, which can be a challenge for small businesses with limited capital.

As a result, many small businesses struggle to implement these integrations, leading to inaccurate transaction records, data loss, and inefficiencies in payment processing.

To address this issue, small businesses should negotiate with their payment processor for access to built-in APIs. By leveraging APIs, they can customize their payment system for better integration with other business tools, often at a more affordable rate.

3. Processing Charges

Since processing fees are deducted per transaction rather than as a lump sum, their effect on businesses often goes unnoticed. However, for small businesses, these fees can significantly eat into profits over time.

Many credit card processors and online payment providers apply the same transaction rates to both small and large businesses. This means that smaller companies, with lower revenue streams, may feel the financial strain of these fees much more quickly than larger enterprises.

Some of these fees can change unexpectedly. Small business owners may struggle to adjust their pricing in real-time to accommodate these fluctuations, often absorbing the extra costs until they can implement markups.

To mitigate the impact of processing fees, it’s important to compare rates across different payment processors and consider providers that offer flat-rate pricing, like Stax. Before committing, have a detailed discussion with your chosen provider to clarify whether rate increases or hidden fees may arise in the future. Also, inquire about the specific conditions that could trigger a price adjustment.

4. Managing Multi-Channel Payment Support

As a small business owner, having the flexibility to accept payments across multiple channels is essential. For instance, if you primarily operate an eCommerce store and rely on online payment gateways, how would you handle transactions at an in-person event like an expo or trade show? Similarly, if you own a brick-and-mortar shop, how would you accommodate customers who prefer to purchase your products online?

Relying on multiple vendors for payment processing can quickly become expensive and inefficient. A more practical solution is to choose a payment gateway that supports multiple payment methods. These all-in-one platforms streamline transactions, enhance convenience, and reduce costs, making payment processing more efficient for your business.

5. Preventing Fraud and Unauthorized Transactions

Fraudulent transactions often stem from data security breaches, allowing cybercriminals to misuse customers’ financial information for unauthorized purchases. In some cases, individuals may shop using stolen credit cards or someone else’s payment details, putting your business at risk. As a small business owner, you could unknowingly become entangled in these fraudulent activities, which can damage your reputation and financial stability.

To mitigate this risk, consider implementing additional verification steps through customers’ issuing banks before transactions are approved. Regularly auditing your payment processor or gateway can also help identify vulnerabilities and ensure compliance with security standards. Look for providers that offer advanced security measures such as point-to-point encryption (P2PE), tokenization, and real-time fraud alerts. Additionally, keeping your platform and software updated is essential to closing any security gaps and preventing potential breaches.

6. Limited Control Over Checkout Interfaces

Relying on a third-party payment gateway is often the most practical solution due to the high costs and infrastructure requirements of hosting your own. However, this also means you may face challenges such as limited control over the checkout process, security concerns, and potential service disruptions. Choosing a reliable payment processor with strong security measures and responsive customer support can help mitigate these risks.

While using a third-party checkout page can be a cost-effective solution, it may not always be the best choice for your business. One major drawback is the lack of control over the checkout experience. If the interface provided by your payment processor is not user-friendly or intuitive, it could negatively impact sales and customer retention. Although you may not be able to modify the platform itself, working closely with your payment provider to discuss customization options and user experience improvements can help ensure a smoother checkout process.

7. Handling Multi-Currency Payments Efficiently

Small businesses have the opportunity to expand their customer base beyond their local markets and accept payments in multiple currencies. However, the real challenge arises when trying to find and integrate payment gateways that support international transactions and foreign currency processing.

Handling foreign currency transactions can be expensive, especially for small businesses. Exchange rate fees can quickly add up, impacting profit margins. Payment systems that support multiple currencies must comply with financial regulations in both the business’s home country and the country of the transaction. Over time, these factors can significantly increase operational costs.

To mitigate this, consider partnering with payment processors that offer competitive foreign exchange rates. Another approach is to incorporate premium services or adjust pricing structures so that customers cover the currency conversion costs.

8. Costly Software Purchases and Maintenance

The expenses associated with acquiring and maintaining payment processing equipment and software can be overwhelming for small businesses. Credit card machines, POS terminals, card readers, and PIN authenticators often come with high price tags that may not align with a small business’s initial budget. Additionally, subscription fees for payment processing software can further strain financial resources.

To manage these costs, small businesses can explore payment processing solutions that require minimal upfront investment, such as Leaders. Some providers also offer equipment at little to no cost under specific conditions. Researching and partnering with such companies can help reduce expenses and improve cash flow.

9. Dealing with Inconsistent Customer Support

Getting reliable support from a mobile credit card processing provider can be challenging. While large businesses often receive dedicated customer service, small businesses are typically left with general support, which may not always be available during their operating hours.

To overcome this issue, communicate with your payment processor and ask detailed questions about their support options. Additionally, ensure that they provide access to resources such as video tutorials, training sessions, and comprehensive guides, so you have reliable references when immediate assistance isn’t available.

10. Navigating Chargeback Disputes

In this context, chargebacks go beyond simply refunding customers when their orders aren’t fulfilled. A key challenge for small businesses is the financial guarantee that institutions require before approving a merchant account.

Since small businesses typically have less capital than larger companies, financial institutions perceive them as higher risk. If your business struggles to meet customer expectations or experiences delays in delivering products and services, you may face an increase in chargebacks, which can further impact your financial stability.

Resolving payment disputes can be a lengthy process, often resulting in funds being held for a certain period, which may significantly disrupt your business’s cash flow. Chargebacks are commonly linked to unauthorized transactions, customer dissatisfaction, and issues related to pricing or delivery. Frequent occurrences of these problems can damage your reputation and erode customer trust over time.

To mitigate chargeback issues:

• Choose a secure and reputable online payment processor.
• Display your return and refund policy clearly on your website.
• Utilize tracking systems and require signature confirmation for deliveries.
• Familiarize yourself with your payment processor’s refund policies.
• Notify customers in advance before processing any recurring charges on their cards.

Bottomline

You may face various challenges when accepting payments for your products and services. To minimize these issues, carefully evaluate payment gateways and credit card processors before making a decision. Additionally, maintaining high-quality service and honoring your commitments to customers can help prevent many potential problems.