According to a survey by Mercator Advisory Group, 76% of U.S. small businesses say they use nonbank payment processing for credit card and debit card payments they accept from customers. What exactly is a nonbank platform? These are institutions that provide banking and financial services, but do not hold a banking license. Most simply, they’re not allowed to take deposits from the public. But they can offer related financial services like loans and credit facilities.
So if businesses aren’t using big banks to handle their payment processing, who are they using? Instead, business owners listed the following alternative payment processing solutions:
- Point of sale (POS) systems
- PayPal
- Square
- Other nonbank options
But the lines are blurring. News broke recently that popular payment processing company Square has submitted an application to form a wholly owned industrial loan company. The company already lends money to small businesses, and now it’s looking to expand its banking offerings.
There’s something greater happening here. Industry experts predict Square (and companies like it) won’t stop there. They’ll move more and more toward full-service business management solutions – meeting the expectations of local businesses that are trending away from traditional banking services.
Why are so many local businesses opting into alternative payment processing solutions?
- Ease of use
- Cost effective
- Additional add-ons (e.g. mobile coupons and text and email receipts)
The first two are pretty intuitive. Anything that’s both cheaper and easier will obviously be more attractive when compared to other solutions. But the ability to incorporate add-ons and other solutions alongside payment processing speaks to something larger – the desire local business owners have to bundle software they’re using on a daily basis so they can work more simply.
Let’s talk about you. Which sounds better to you?
- Option A: Buy a software system or tool for each and every back-office function.
- Option B: Buy one tool that can handle it all.
That’s not a trick question. Business owners like you make this decision every day, and many still go for Option A. In fact, 64% of small businesses already use an average of 3 software solutions to run their businesses and automate daily, otherwise time-consuming tasks. The most common software solutions we’re talking about:
- Accounting software
- CRM software
- Sales automation
- Help desk software
- Collaboration tools
- Financial and payment processing tools
Off the top of your head, how many of these does your business employ? What’s that feel like – managing each account? How many logins, account reps, daily tasks and screens do you have to deal with on the daily? I’m feeling overwhelmed just thinking about it.
What to Look for When Choosing an Alternative Payment Processing Provider
As the small business landscape continues to shift toward more comprehensive solutions in payment processing and other back-office functions, it’s important you ask the right questions and know what to look for in a trustworthy payment processing solutions provider.
Before you make any decisions, have these questions in mind. Don’t be afraid to ask them of anyone you come in contact with for these (and other) services.
- Exactly what features does the tool include?
- Is it limited to a few functions, or does it consolidate more back-office functions for you?
- Are the features included scalable?
- Are you going to be charged more to do the same tasks should your business grow over time, either by revenue or number of customers?
- Is the tool broken up by license or by individual using it? What happens to your contract if you add new staff members who would need access?
- How does the tool store information?
- Will it keep up with customer and business data you input, or will you need to employ an outside solution to do that?
- How long will it store your data for you?
- Are there any data storage limits, when it comes to the size or amount of data you need stored?
- Is the data secure, and how do they ensure that?
- What does the investment look like after all is said and done?
- Are you expected to pay monthly, annually or in another increment of time?
- Are there sign-up fees, transaction fees, maintenance fees, service fees, late fees or even yearly increases associated with your account?
- How much support will you get?
- Does the tool come with a dedicated service representative?
- Does the software include support for setup, training and ongoing issues?
- Are there fees associated with additional support, should you require it?
- If you’re unhappy with the solution, what options do you have?
- Is it possible to negotiate a trial run?
- Is there a money-back or satisfaction guarantee?