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Top 5 Payment Processing Challenges for Small Businesses

Small businesses often struggle to compete with the bigger competitors out there that have significantly more infrastructure and resources at their disposal. However, the online environment and technology that has developed from it has leveled the playing field for many small businesses, helping them reach the same target audiences as the larger firms and provide significant growth opportunities. Technology continues to change how we can pay and accept payments. Albeit much more positive, challenges do remain for small businesses particularly in the area of payment processing.

Whether you are an eCommerce business, mobile retailer, storefront operation or service-oriented firm, these are some of the small business payment processing challenges you may face with some recommendations on how to address them: 

  1. Ever-increasing chargeback rates. A 2016 working paper from the Federal Reserve Bank of Kansas City noted there is an across-the-board increase in chargebacks for online transactions in all types of business categories, noting that no business type is free of vulnerability to these fraudulent schemes. Small businesses were identified as being more vulnerable due to the lack of knowledge and awareness of how these schemes are enacted because they have not educated themselves on what to look for in terms of suspicious activity, nor do they have a chargeback management plan in place. The best approach is to work with a payment processing company that can provide information on how to create a chargeback management plan, including tactics like having a clearly stated returns and refund policy, offering delivery tracking, and keeping very detailed paperwork on each transaction.
  2. New and growing types of fraud. Juniper Research has studied the global payments industry and identified growing areas of fraud, including online and mobile, which small businesses may not be aware of or, if they are, know how to combat. This includes the use of mobile malware to break into payment systems to get cardholder data. Other types of fraud include friendly fraud, affiliate fraud, botnets, phishing, velocity attacks and triangulation just to name a few. Additionally, eCommerce sites that want to work with a global customer base are also experiencing greater fraud, according to the same research study. This can be challenging to small businesses that see incredible potential to grow their customer base by serving these markets. It is important to stay attuned to what is going on, such as reading these research reports and working with a payment processor that can get you up to speed about what is going on and what works to stop it.

  3. Complex compliance and regulatory environment. With the rise in fraud and chargebacks, financial institutions, card companies, and governments are seeking out ways to stop it while not infringing on the global marketplace of online and mobile transactions that is fueling economic growth. Unfortunately, their answer is to increase the amounts of rules and regulations about what you can and cannot do as a small business when conducting these transactions, which can become confusing and frustrating not to mention costly if you don’t follow everything. Complying with all these requirements can be overwhelming to a small business owner that doesn’t have a fintech expert on board to determine how to make sure every one of the 12 main PCI requirements are being met. However, the PCI security standards council does make very clear information available and encourages small business owners to work with a payment processing company that can help implement all the requirements or take care of them on their end.

  4. Payment integration requirements. Small business owners often patchwork different parts of their business together either out of lack of knowledge or limited resources, not realizing the efficiency gains they could make with integration. This is especially the case with payments as new technology emerges and many small business are left with legacy systems where they cannot take advantage of new platforms that bring inventory, payments, accounting, project management and many other tasks together for a streamlined process. The other challenge is that previously the only payment integration systems were made for large enterprises and were too expensive for the small business owner. However, there are now payment processing providers that have an API that allows for customization and the ability to integrate payments with other parts of the company.

  5. Rising customer expectations. Technology is altering customer expectations about what a company should deliver for them, including the type of payment options and the overall user experience. Small businesses are challenged to keep up with what their customers know and expect from them. Should they offer a mobile app for payments and promotions? Is it worth it to add cryptocurrency and eCheck payment options? Will it make a difference if an on-demand service is provided so customers can order online or from their phone and then pick up their products in a few hours? Small businesses don’t know if these options are worth the investment or if their customers will just change their minds again. 

These payment-related investments can be challenging, but they are important to consider, including surveying the customer base and conducting research on the feasibility rather than be potentially left behind in the race for the most customers.

What is a Chargeback?

BluePay is pleased to bring you this valuable information from Due, makers of a free digital wallet that allows users to easily make and accept payments online. 

Topics: Partner Posts, Guest Blog Posts, E-Commerce and Online Payments, Payment Technology, PCI Compliance and Fraud Prevention, Small Business Tips, Awareness

Welcome to the BluePay Blog!

Whether you're a small business, an enterprise corporation, a financial institution, or a software partner, we have created a series of blog posts to help you and your customers, learn more about the complex nature of payments. Take a look to learn how payments can help to simplify your business operation, and may even help to grow your revenue.

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