Overcoming Online Payment Challenges
5 online payment challenges and how eCommerce merchants can overcome them.
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26 July 2018
Third party payments processors explained.
With more Australians swapping that wad of cash for digital payment methods such as credit cards and e-wallets, there’s an increasing pressure on small and medium businesses to follow suit and accept payments online. Data released from a 2016 survey by the Reserve Bank of Australia (RBA) shows that 52% of Australians made payments with cards as opposed to just 37% using cash. To put this in perspective, only 43% of payments were made via card in 2013.
However, for many small and medium businesses, payments processing can be as much a challenge as it is an opportunity. This is because a merchant account is a prerequisite for payment processing, but it’s not always easy (or affordable) to get one.
The good news is, you can rely on a third-party payment processor to ensure that revenue never stops trickling in. Let’s take a look at how a third-party payment processor can help you easily accept online payments from your customers.
What is a third-party payment processor?
A third-party payment processor is an entity that helps you receive payments online from your customers without first setting up your own merchant account with a bank.
If you’re wondering what a merchant account is, it’s a business bank account through which merchants can accept online or card payments from their customers. Businesses that have a merchant account can directly process and settle payments in their own account. In contrast, businesses that don’t have their own merchant account can use one owned by a third-party payment processor.
In other words, third-party payments processors allow merchants to entirely bypass the need to own a merchant account. Bambora is a third-party payment processor; we work directly with banks to settle and disburse funds on your behalf.
That may lead you to wonder, “Why do I need a third-party payment processor when I can have my own merchant account?”. We’ve answered this question for you below.
How do you know if you need a third party payment processor?
If you are a small or medium business, or one that processes a low volume of transactions online every month, setting up a merchant account may prove to be a rather expensive deal. This is thanks to the different types of fees attached to them, including set-up fees, monthly fees and transaction fees. Not to mention the arduous underwriting process you’d have to clear for your bank to sign you up as a merchant with them in the first place.
For many businesses, a third-party payment processor thus acts as the perfect alternative to a merchant account.
Here are some factors that will help you decide if a third-party payment processing company is what you need instead:
What are the advantages of a payment service provider?
As we’ve discussed above, businesses that are looking to scale have a lot to benefit from their own merchant account. For new or small businesses, on the other hand, a merchant account may not prove economical.
With that in mind, let’s take a look at some of the benefits of partnering with a third-party payment services provider:
Are there any disadvantages of a third-party processor?
Partnering with a payment processor can help you easily and conveniently accept credit card payments when you’re just starting out. But as business scales, most merchants may find that a merchant account coupled with a payment gateway works better for their needs.
With that in mind, it helps to know what you cannot expect from a third-party payment processor:
To learn more about a payment facilitator, payment gateway and merchant account, check out this comprehensive blog post.
Whether you’re starting out or have growth on your mind, Bambora has a payments solution for you. Our onboarding process is one of the fastest on the market, which means you’re ready to go just a few clicks later. Simply contact one of our sales experts for guidance today for more.
Victoria Galloway is Bambora APAC's Technical Copywriter, and has been writing and producing in the payments and eCommerce space for a number of years, both in the UK and Australia.