What are the key features to look for in a payment processor?

Tilly Michell5 minutes
E-commerce
What are the key features to look for in a payment processor?
In this article

Once companies have established their payments infrastructure, it’s easy to forget that it may need updating to keep pace with technological developments and the changing needs of a growing business with global ambitions. This is a mistake. The wrong payment stack can lead to problems such as:

  • A negative checkout experience for overseas customers

  • Costly currency conversion fees

  • System failures during peak sales periods

  • Increased risk of fraud and chargebacks

  • Issues when expanding into new markets

That means leaving money on the table, losing trade and losing valuable relationships. By reading this article on the key features to look for in a payment processor, you can arm yourself with the knowledge you need to boost global payment acceptance rates, eliminate unnecessary currency risk and fees, and streamline your global financial operations.

What does a payment processor do?

A payment processor is a crucial player in the electronic payment ecosystem, facilitating secure financial transactions between customers and merchants. Its primary functions include authorising and verifying the legitimacy of transactions and securely transmitting payment data between the merchant acquirer and the customer’s bank (also known as the issuing bank). 

Payment processors also implement crucial security measures, such as encryption and fraud detection, to safeguard sensitive information. And they provide reporting tools and customer support, contributing to the overall reliability and success of electronic payment transactions. Some payment processors also function as merchant acquirers. These financial institutions or payment service providers (PSPs) authorise and settle the transfer of funds from the issuing bank to the merchant’s account. They also provide other services to merchants, including taking on the risk of fraud and chargebacks.

When choosing a payment processor, merchants should ask whether it supports popular payment methods, including digital wallets such as Apple Pay and buy now pay later (BNPL) options such as Klarna. The landscape of digital payments is evolving rapidly, and embracing these innovations can offer several strategic advantages for businesses.

Firstly, supporting digital wallets enhances the overall customer experience by providing a convenient and efficient payment option. Rather than having to fill out lengthy customer information forms, these solutions allow buyers to pay with a couple of taps. Digital wallets are rising in popularity all over the world. In 2022, they accounted for roughly half of global eCommerce payment transactions. Businesses that accommodate these payment methods can attract a broader audience, reduce friction at their checkout, and improve payment acceptance rates.

It’s important to note that preferred payment methods differ by country. For example, whilst PayPal is a favourite payment method in the US, AliPay is the most popular payment method in China. By supporting a wide range of payment methods, your business can improve customer conversion rates in all the markets which you expand to. 

How much does payment processing cost?

It’s important for merchants to understand the fees charged by payment processors to avoid any unwanted surprises, especially when dealing with a high volume of international transactions. When calculating the total cost of using a payment processor, consider the following:

  • Monthly or annual fees: Some payment processors charge a regular fee to cover services such as account maintenance.

  • Transaction fees: Charged for each transaction, these usually consist of a flat fee plus a percentage of the transaction amount. 

  • Interchange fees: These are charges set by card networks (like Visa and Mastercard) and paid by the merchant acquirer to the issuing bank. These fees are usually charged to merchants as part of their transaction fees. Learn more about interchange fees here

  • International card processing fees: Higher transaction fees apply when the card being used for the payment is issued in a different country than the merchant’s account. 

  • Foreign exchange (FX) fees: Merchants may be charged an FX fee when accepting payments in foreign currencies. These can be avoided if their acquirer offers Global Accounts which allow merchants to settle ‘like-for-like’ in multiple currencies. 

  • Chargeback fees: These are charged to merchants when a customer disputes a transaction, leading to a chargeback.

  • Developer costs: These may be incurred if your payment processor does not enable simple integration with your eCommerce platform, or if it doesn’t allow you to easily integrate additional payment methods.

Security and compliance 

Security and fraud prevention are crucial when it comes to financial transactions, to protect both companies and customers. A good payment processor will have advanced security protocols that are ready to deal with evolving threats. There are certain offerings you can check for when trying to find the right payment processor to keep your business safe, profitable and compliant: 

3D Secure (3DS) protocols, such as "Verified by Visa" or "Mastercard SecureCode", require customers to complete an additional form of authentication when paying online, such as entering a one-time code or password. This reduces the risk of card fraud.

Smart 3DS optimisation is a tool offered by some payment processors. This is where the 3DS engine automatically analyses whether additional authentication is necessary based on the transaction risk, applicable regulatory requirements, and policies. As well as offering Smart 3DS optimisation, Airwallex allows you to customise fraud and 3DS rules based on your own business model, ensuring you get the right level of protection for your business without unnecessarily increasing friction at your checkout.

Machine-learning powered checkout optimisation is another benefit that’s worth looking for. Features include automatic retry technology, which enhances payment acceptance rates by ensuring declined transactions are instantly retried based on various rules

Pre-chargeback programs can help save your business time and money. Chargebacks are costly, even if you win a payment dispute (which is rare) your business will incur a fee. Pre-chargeback programs are designed to help your business resolve disputes and fraudulent payments before they become chargebacks, typically by automatically refunding disputed transactions at a much lower cost than a traditional chargeback. Examples of pre-chargeback programs include Visa Rapid Dispute Resolution (RDR) and Mastercard Collaboration.  

Global licensing is another crucial feature to look out for if you intend to expand your business internationally. Not all payment processors hold the necessary financial licences to enable merchants to accept payments globally. If you wish to expand your business beyond your domestic market, it’s important to choose a payment processor that is licensed in the markets you wish to expand to.  

How does your payment processor integrate with other software?

When choosing a payment processor, you need to consider the technology you already have in place and the capabilities you have to design your own custom-made solutions.

Payment software can come in a 'plug-and-play' format that integrates seamlessly with popular eCommerce platforms like Shopify, WooCommerce and Magento. These solutions are easy to implement, but if you’re looking for a highly customised checkout experience, you may wish to explore alternative integration options. 

Another option is to build your own checkout in the back-end with the application programming interfaces (APIs) provided by your payment processor. This requires more development resources and time, but the payoff is more flexibility and control over the user experience.

There are other choices you can make when it comes to payment providers. One is a hosted payment page. This takes customers to a third-party page to complete the payment. It’s a less seamless experience, but it’s easy to integrate.

If your business involves mobile apps, Software Development Kits (SDKs) provided by payment processors can help you integrate payments. Similar to API-based integration, it requires a certain level of development expertise, but, on the other hand, it offers a more tailored mobile payment experience.

The benefits of seamless integration

There are many benefits to choosing a payment processor and acquirer that integrates seamlessly with your pre-existing tech stack. It will cut development time and costs, which will boost your bottom line and prevent unnecessary delays to any expansion plans. 

Frictionless integration is great for scalability. As the business grows, it’s easy to add or adapt features or switch to a greater degree of customisation without disrupting operations. It will also ensure that you are future-proof: the next big tech development won’t throw you off your game but will enable you to adapt and develop. 

Having payment technology that integrates with accounting software can save you from the headache of time-consuming reconciliation processes. By ensuring that payment data automatically flows into your financial systems – making it transparent, easy to mine data from, and in the right format for bookkeeping – you remove obstacles in the way of growth.

Strong customer support and crisis management

Customer support is a must-have for any modern business, and it’s something you should look out for when choosing a payments partner. 

Nothing should get in the way of you maximising revenue, even when inevitable hiccups occur. Your payment processor should have systems in place to help manage chargebacks efficiently. This includes providing necessary documentation and evidence to dispute illegitimate requests for refunds. There should also be advanced fraud detection tools on offer, which can perform services including monitoring transactions for unusual patterns. If fraud is suspected, your payment provider should be able to help investigate and resolve the issue.

In cases where legal or regulatory issues arise, payment providers can offer guidance and support. This can include staying compliant with payment industry regulations and assisting in navigating legal challenges related to payment processing. In the event of a security breach or potential fraud, there should be protocols in place for immediate response. This includes notifying the merchant, investigating the issue, and implementing corrective actions to minimise damage.

Powerful payments technology with Airwallex

Airwallex empowers global businesses with compliant and secure payment processing and acquiring in 180+ countries, 180+ currencies, and 160+ payment methods. By adopting Airwallex as your payment processor, you can decrease the cost of cross-border eCommerce and maximise global payment acceptance rates. 

Airwallex offers like-for-like settlement in multiple currencies, allowing companies to avoid unnecessary FX fees when collecting payments from overseas customers. With an Airwallex Global Account, merchants can collect, hold and pay out money globally without exchanging currencies. Where currency exchange is unavoidable, we offer market-beating rates. 

Airwallex also helps businesses minimise fraud and chargebacks with 3DS and pre-chargeback programs including Visa Rapid Dispute Resolution (RDR) and Mastercard Collaboration, and maximise payment acceptance rates, with machine-learning powered checkout optimisation tools. 

Find out more about how Airwallex can help your business grow. Click here to sign up.

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Tilly Michell
Content Marketing Manager

Tilly manages the content strategy for Airwallex. She specialises in content that supports businesses in their growth trajectory.

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