Selecting the Right Credit Card Processing Company

The right merchant account provider is crucial to implementing an efficient surcharging program. When evaluating potential providers, there are several factors to consider...

• Transparent pricing: Look for a merchant account provider that offers transparent pricing structures and clearly outlines their fees.
• Flexible contract terms: Seek providers that offer flexible contract terms. That means no lock-in long-term contracts or hefty termination fees.
• Payment processing services: As well as credit card surcharging, the provider must also have strong payment processing services for alternative payment methods, including debit card transactions and a point-of-sale solution equipped to accept cash.
• Security and compliance: Verify that the provider adheres to industry standards, such as Payment Card Industry Data Security Standard (PCI DSS) compliance, to protect sensitive customer data and minimize the risk of data breaches.
• Customer support: Look for providers that offer responsive and knowledgeable support teams through multiple channels (phone, email, and chat).
• Competitive processing rates: Seek a merchant account provider that offers competitive processing rates for non-credit card transactions.
• Quick and easy setup: Opt for providers that offer seamless onboarding and setup processes to minimize disruptions.
• Integration capabilities: Consider whether the provider offers integrations with your existing business systems, such as e-commerce platforms, point-of-sale (POS) systems, or invoicing software. This ensures compatibility and smooth data flow between different systems.
• Reporting and analytics: Look for providers that offer robust reporting, analytics, and integration tools for valuable insights into transaction volumes, revenue trends, and customer behaviors.

It’s also important to highlight that the size of the business, type of business, and sales volumes will all contribute to determining which provider can offer the best solution. High-risk merchants (those with low sales volumes) will have to consider which provider offers not only the best service while they’re small but which will grow with them as their sales volume increases.

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Understanding Surcharging

Surcharging refers to the practice of adding a small fee or surcharge to a customer’s transaction when they choose to pay with a credit card. Merchants get the lowest fees for credit card processing by passing on the costs associated with processing that particular payment method.

Benefits of zero-fee processing (through surcharging):

• Cost recovery: Surcharging offers a means to recover credit card acceptance costs.
• Competitive pricing: Surcharging lets business owners offer competitive pricing to customers who choose to pay with alternative methods, such as cash or debit card transactions.
• Financial flexibility: Businesses can gain the financial flexibility to allocate funds towards business expansion, enhance products or services, or improve customer experience.
• Payment method diversification: Surcharging incentivizes customers to explore alternative payment methods, such as cash or debit cards, which do not incur high fees.

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Payment Gateways: Everything you need to know

What is a payment gateway?

A payment gateway creates a secure connection between a merchant’s e-commerce site and the payment processor. It encrypts the data that’s passed with every card transaction, verifies its authenticity, and ensures it’s sent securely. Payment gateways are typically the last stop for payments before they are routed to a payment processor.

Payment gateway vs payment processor: what’s the difference?

The difference between a payment processor and a payment gateway lies in the fact that one—payment the processor—is the service provider facilitating the transaction, while the other—the payment gateway—is the communication channel responsible for securely transmitting the payment data to the payment processor and credit card networks. Another critical difference is that for purchases made at a physical location, the POS terminal supplied by the payment processor is all that’s needed to verify the authenticity of a card, while in card-not-present transactions (like those made online), the payment gateway will authenticate the card before securely sending its details to the payment processor. Naturally, the riskier nature of card-not-present transactions makes security an utmost priority when verifying and transmitting card details. That said, credit card transactions are still one of the most secure B2B payment methods.

Should payment processing companies have proprietary payment gateways?

Short answer: yes.

Payment processors should consider bundling all the services a merchant needs to accept payments, including equipment and support for setting up a merchant account. In some cases, the payment processor will also have their own proprietary gateway. The value in this is that the processor can control the entire transaction flow—they’ll facilitate payment acceptance, securely send payment data to card networks and banks, fund the merchant, etc.—rather than bringing in another third party.‎

Long answer: still yes, but here’s more context.

Merchants rely on third parties to help with their payment processing needs. Commonly outsourced components include shopping cart plugins, customer portals, and of course, payment gateways—some payment service providers even outsource the process of tokenizing transactions to ensure PCI compliance.

The problem with this lies in its impact on the overall customer experience. Customers are at the heart of payments, and payment processors are feeling pressure to create more seamless transaction flows.

When payment information is passed between multiple vendors—many of whom are not privy to the merchant’s business needs or have not built relationships with the merchant—the transaction flow feels fractured and lackluster. The merchant loses a significant amount of control, and the payment processor is unable to oversee the entire customer experience. Unfortunately, few payment processors supply a holistic suite of merchant services—proprietary payment gateway included. Those that do ultimately perform payment facilitation in-house can ensure a more seamless payment experience for customers and greater back-office efficiencies for merchants.

Payment processors that operate as gateways can control the entire transaction flow without experiencing downtime by having to depend on customer service, onboarding, or any other myriad third parties. Outsourcing degrades the customer experience, and there lies the value of developing and controlling every facet of a transaction.

What are examples of a payment gateway?

Popular payment gateways include:

• Beanstream / Bombora
• Chase Paymentech (Orbital)
• Heartland Payments
• USAePay
• CardConnect

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Credit Card Transaction Processing: Key Components

While credit card transactions are typically processed very quickly, what happens behind the scenes is complex. The process requires many components that collaborate with each other to ensure that funds move securely and efficiently.

Here’s an overview of the parties that participate in this process:

Cardholder

The cardholder is the individual who owns the credit card and uses it to make purchases for goods or services.

Merchant

The merchant is the business or service provider that accepts credit card payments from customers in exchange for goods or services.

Point-of-sale (POS) system

The POS system is the hardware and software the business uses to accept and process credit card transactions and includes terminals, card readers, and software applications.

Payment gateway

The payment gateway is a service that securely transmits transaction information between the business’s POS system and the credit card processor.

Credit card processor

The credit card processor, also called the “payment processor,” is a company that works with the card networks and issuing banks to authorize, authenticate, and settle credit card transactions on behalf of the business.

Card networks

Card networks—such as Visa, Mastercard, American Express, and Discover—facilitate communication between the credit card processors and the issuing banks and set transaction rules and standards.

Issuing bank

The issuing bank, also called the “issuer” or “card issuer,” is the financial institution that issues the credit card to the cardholder. It authorizes and approves transactions, and it provides the funds for the purchase.

Acquiring bank

The acquiring bank, also known as the “acquirer” or “merchant bank,” is the financial institution that has a contractual relationship with the business to accept and process credit card transactions. It settles funds with the issuing bank and deposits the funds into the business’s account.

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Why is Payment Processing Important?

Payment processing allows for transactions to be quick and effective. Information is sent securely from merchant terminals to consumer banks, and back, in a matter of seconds.

These systems handle all communication between issuing banks, credit card networks, and financial institutions — and they do it without requiring the cashier or customer to understand or get involved in the process. This ensures a more streamlined customer journey and experience. With e-commerce and digital transactions increasing, payment processing is no longer a helpful tool, but a necessity — especially when preparing a digital storefront for peak season.

According to Deloitte’s trends and insights report for 2025, checks are gradually moving to extinction, and the use of cash is declining. Credit and debit card transactions, including peer-to-peer (P2P) transactions, will continue to grow in place of check payments. In the US, digital payments have now surpassed traditional payment methods, with 9 in 10 consumers reported to have made a digital payment in 2024.

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8 Reasons Why Consumer Spending Patterns Change

There are many drivers behind the changes in consumer spending habits. While some are predictable, like time of year, other real-world factors can cause these patterns to break. 

Here are 8 of the top reasons consumer spending patterns change:

1. Seasonality

Spending patterns change throughout the year, varying from industry to industry. For example, spending in retail peaks during the holiday season. Travel spending typically ramps up closer to the summer, as people spend more on vacations and experiences, and then again during the holiday season, according to SpendingPulse™. Within travel, different sectors exhibit different patterns. Spending on airfare increases before travelers go on vacation because customers pay when booking their flights. In the hotel sector, customers typically pay once their stay is over, so spending lags slightly.

2. New products

New product launches and fads can also contribute to fluctuations in consumer spending. Over the years, releases of new technologies like phones and headphones have generated significant buzz and heightened consumer spending. The release of blockbuster video games can also drive a surge in entertainment sales and influence the broader economy. As one example, Call of Duty: Modern Warfare II surpassed $1 billion in worldwide sell-through in the first ten days of its release.

3. Commuting

Changes in when and where people work can have a sizeable impact on consumer spending patterns. As return to office mandates continue to be implemented, brick-and-mortar sales in major commuting cities may bounce back in response. Spending will tend to be concentrated on certain weekdays. For example, Tuesdays through Thursdays have seen increased lunchtime activity in parts of New York City, according to the Mastercard Economics Institute. At the same time, other workers have remained hybrid or fully remote, which has driven an uptick in online shopping.

4. Macroeconomic conditions

The broader economic landscape will always play a hand in how consumer spending ebbs and flows. A strong labor market and high employment confidence can drive increased consumer spending. On the other hand, high price inflation does not empower consumers to spend.

5. Fiscal policy

Fiscal activity at the national, state or local levels can also influence consumer spending behavior. Consider the stimulus checks that were provided during the COVID-19 pandemic. These large spikes in available cash and spending power drove boosts in consumer spending over time.

6. Stock market performance

When the financial markets are in flux, consumer spending patterns react. During the Great Recession of 2007-2009, for example, consumers were worried about job stability and savings, and spending slowed in the U.S. Stock market performance is a strong indicator of consumer confidence, so shocks like these can affect spending behavior.

7. Fuel prices

While prices in general can dissuade or encourage consumer spending, fuel prices in particular can impact spending. This is because fuel prices influence consumer mobility, which refers to how people get from place to place. When people are more likely to jump in their cars to head to the mall, brick-and-mortar sales at retailers and restaurants go up.

8. Demographic changes

Finally, the changing composition of populations over time can stimulate different consumer spending trends. For instance, global birth rates have been falling and are expected to continue falling through 2100. This decrease in the child population can have ripple effects in the broader economy, especially in the addressable market for children’s products.

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Two Stages of Transaction Processing

 

Stage #1) Authorization

• Card details and purchase amount must first be verified and approved by the issuing bank. Authorization is the process by which the issuing bank approves or declines a card transaction. This takes place within a matter of seconds at the time of purchase.
• The issuing bank checks the validity of the credit or debit card used by the customer. This is done by utilizing various fraud prevention tools, including Address Verification Service (AVS) and Card Security Codes (CVV2, CVC 2 and CID).
• The response is received by the merchant.

Stage #2) Clearing and Settlement

• Clearing is a process through which an issuing bank exchanges transaction information with a payment processor.
• Settlement is a process through which an issuing bank exchanges funds with a payment processor to complete a cleared transaction.
• Clearing and settlement occur simultaneously.

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Payment Processing Technology

Every business is unique, especially when it comes to accepting payments. The technology that you use to run your business is vital to your success, so it pays to really understand your needs and get the best payment technology solution possible.

Online Invoicing

Invoices are an essential part of billing for a majority of businesses. Many businesses still rely on very manual processes such as Excel templates, in order to create invoices. While this might seem like a cost-effective solution, the time wasted in creating your invoices and the lack of connectivity between your data can be highly detrimental.

EMV Smart Terminal

Physical credit card processing terminals are great for businesses with brick-and-mortar locations to take in-person payments in-store. If your customers are physically coming to you and swiping (or dipping) their cards, this is the solution for you. An important thing to remember is to make sure whatever machine you decide to purchase comes with full EMV and NFC technology enabled. This means you’ll be able to accept chip cards as well as contactless payment methods like contactless cards and digital wallets like Google Pay or Apple Pay.

Mobile Payment Solutions

Perfect for the on-the-go business owner, mobile payment technology can be a game-changer for your business. Some businesses can get by with just a mobile solution, but a large majority use their mobile credit card readers and apps for trade shows and field reps to be able to take payments on the spot.

Online Shopping Cart

Online shopping carts are powered by payment gateways and are essential for any eCommerce business. Even if you mainly operate a brick-and-mortar location, having an online store is a great way to increase your product’s visibility. Processing payments through an online shopping cart couldn’t be easier, and typically involves a quick phone call with your provider to activate the payment gateway.

Virtual Terminals

While countertop POS systems or card readers may be the obvious choice for card processing equipment for some businesses, they may not be suitable for all. Especially if your business takes orders over the phone, mail, fax, or in-person, you are going to need the help of a virtual terminal. Virtual terminals are simply web-based applications that can run on your laptop, desktop, tablet, or smartphone, transforming them into a POS system so you can process transactions anywhere as long as you have an internet connection. All you need to do is enter the payment info into your virtual terminal and it will then be encrypted, authorized, and submitted for online payment.

Point-of-Sale

Point-of-sale systems are huge for restaurant and retail locations. These are large, integrated machines with a computer monitor, cash register, and an online credit card processing solution. POS systems come in a wide variety of shapes and sizes, so make sure you do your research and choose one with all of the right features for your unique business.

API

If you’re needing a very specific payment solution for your website or app, a payment processing API is probably the way to go. Some merchant services providers offer their API technology to developers to integrate into their proprietary applications, making it the perfect online credit card processing solution for companies needing something more customizable.

Tip: When selecting a payment processor, it’s essential to consider how you will do integrations with your existing business software, such as accounting software, and e-commerce platforms. While some payment processors may have pre-built integrations, you will likely want to look for a solution with an open API that enables you to build custom integrations. Source

What are Chargebacks and How to Reduce Them?

Purchase disputes, which occur when a customer objects to paying for some or all of a purchase charged to their account, can be expensive. The process of investigating them can be time intensive and costly for merchants. Plus, if the dispute is successful, the payment network (e.g., Visa® or Mastercard®) charges a fee for the administrative expenses incurred when investigating and processing the customer’s refund, a process known as a chargeback. If you have a significant number of chargebacks in a short time, your payment processor may charge you additional fees and penalties.

Why chargebacks happen

Purchase disputes can result from a number of situations, including simple mistakes, misunderstandings or outright fraud. If there is difficulty reaching a resolution, the dispute may also be reviewed by the payment networks to determine whether the merchant or the customer ultimately receives the funds.

Here is a closer look at some common scenarios that result in chargebacks:

Fraudulent or unauthorized charges

This is among the most common reasons for a chargeback. “Now that chip cards have started to replace the old less-secure magnetic-stripe cards, fraud-related chargebacks are usually from online or other card-not-present (CNP) transactions,” says Joe Lamar, Merchant Services product executive at Bank of America.

However, in addition to regular fraud, there is also “friendly fraud,” in which a consumer disputes the purchase despite authorizing and perhaps even receiving it. For example, Jay lent his brother his credit card to purchase a $20 pair of socks. His brother bought the socks along with a $50 hooded sweatshirt. When Jay looked at his credit card statement, he didn’t recognize the charge for the sweatshirt, so he called his bank and disputed the purchase.

Unrecognized charges

This typically happens when a store has a different name from the company brand name. A store called ABC Pastry Shop that sells pastries, for example, uses the name Bakery Express on its receipts. When Daniel sees a charge from Bakery Express, a company he has never heard of, he suspects fraud and files a dispute.

Duplicate or incorrect charges

This could occur when a cashier rings up a purchase twice, for example. Kiran went to his local department store and purchased a pair of work boots using his debit card. A few days later, when Kiran was reviewing his bank account, he noticed there were two charges for the exact amount he paid for the work boots. That error resulted in a chargeback.

Issues with the purchased goods

In this scenario, the purchased goods or services were damaged, defective, not as originally described or not delivered at all. For example, Anna ordered a brand-name video game controller from an online retailer, described as red, transparent and wireless. When she received the controller, it was a standard gray wired controller. Anna tried to contact the seller but was unable to reach them, so she filed a dispute.

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How Fast Bank Payments Are Helping To Modernize Public Sector Disbursements

State, local and regional government entities play a critical role in the U.S. economic engine. In 2023 alone, these entities spent $4 trillion on a wide range of public goods and services, spanning programs as diverse as public assistance, education, healthcare, community development, criminal justice and public safety, as well as disaster relief and infrastructure initiatives.

Disbursements represent a significant portion of government spend, with an average $7,708 annual spend per person, and account for 22% of all disbursements to consumers—second only to income and earnings payments. Even today many disbursements remain largely manual and paper-based. As the volume and diversity of government payments continues to grow, so do the costs, complexity and security risks associated with legacy payment methods.

While significant prioritization and progress of e-government initiatives and services has been seen recently, payments modernization in the public sector has not necessarily evolved at the same pace. This translates to an often slower, less transparent and more cumbersome payments experience in an era in which consumers have become accustomed to expanded digital payment options and the convenience, speed, transparency and security that they bring to our everyday lives.

Changing expectations

The status quo is ready to change for the better. Digital-first experiences in other aspects of constituents' lives can lead to possible heightened expectations for government payments and the want for accessible and intuitive payment choices that deliver greater security, speed, transparency and convenience.

“Individuals want to receive payments efficiently, smoothly and simply,” said Brian Page, Head of Government Banking, Middle Market Banking & Specialized Industries, J.P. Morgan. “Government entities may want to consider all the ways people want to get paid, and think about if they are set up to be able to deliver.” 

“Payment modernization is happening in all verticals and industry sectors in the private sector,” said Curtis Webb, Senior Director, Head of Go-to-Market Strategy, Visa Direct North America. “With the gig economy, earned wage access, marketplaces and digital banking, millions of consumers already receive payments within minutes securely to their bank accounts via their debit cards.” Constituents may be asking their government officials to provide the same payment experiences that they have come to expect in their everyday lives.

Instead, constituents face persistent pain points and limited options. With paper checks, for example, constituents must wait for the check to arrive in the mail, and then take additional time and effort to deposit it. Frequent address changes can result in checks never arriving, requiring re-issuance. There’s no way to track the status of check payments efficiently, which can lead to an increased risk of check fraud.

Further, various digital payment methods, such as direct deposit via ACH, require constituents to provide sensitive account and routing numbers to government entities. Even if willing, constituents may not know or have on hand their account number and routing information, leading to additional effort and inconvenience. The negative impact of disbursement complexity and fraud risk can be compounded in times of crisis and urgent financial need, such as when constituents are waiting for disaster relief, unemployment or child welfare payments.

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