Creating an independent sales organization, or ISO, to recruit merchants and handle their credit and debit card payments is the easiest way to get into payment processing.
However, the sector is competitive, and you will regularly compete with other processors for business. A percentage of credit card traffic, a set charge for PIN-based transactions, and anything you can collect on payment processing equipment is yours.
Let’s learn about how to start a payment processing company successfully in 2023.What exactly is a PSP?
Third-party payment service providers (PSPs) are essential for businesses looking to accept digital payments from their customers. They offer a wide range of payment options, including credit cards, debit cards, and e-wallets, making it convenient for consumers to pay for products and services online.
One of the key roles of a PSP is to verify transactions, ensuring that the payment is legitimate and reducing the risk of fraudulent activity. By integrating with a PSP, retailers can offer secure payment processing and build trust with their customers.
In addition to transaction verification, PSPs also handle the technical aspects of payment processing, such as managing payment gateways and providing secure data encryption. This allows businesses to focus on their core operations without having to worry about the complexities of accepting and processing payments.
PSPs play a crucial role in bridging the gap between consumers and businesses, enabling smooth and seamless payment experiences. By partnering with a reliable and reputable PSP, businesses can enhance their online presence, attract more customers, and increase sales.
Overall, a third-party payment service provider is a valuable asset for businesses, offering a wide range of digital payment options, transaction verification, and secure payment processing. It is essential for businesses to choose a PSP that fits their specific needs and requirements to maximize the benefits of accepting digital payments.
Market analysis
Let's start by outlining the key areas to focus on:
1. Target market: Identify the specific industry or industries you plan to target. Consider factors such as size, growth rate, and demand for payment-processing services. Research industry reports, government data, and competitor analysis to gather insights on market opportunities.
2. Competition: Conduct a thorough analysis of your competitors in the payment-processing industry. Identify their strengths, weaknesses, pricing models, and target market segments. This information will help you differentiate your offering and identify any gaps in the market that your startup can fill.
3. Customer needs: Understand the pain points and requirements of your target customers. Conduct surveys, interviews, or focus groups to gather feedback from potential clients. This will enable you to tailor your services to meet their specific needs and gain a competitive advantage.
4. Market trends: Stay updated on the latest trends and innovations in the payment-processing industry. This includes technologies (such as mobile payments or blockchain), regulatory changes, and shifts in customer preferences. Analyze how these trends may impact the market and inform your business strategy accordingly.
5. Pricing and revenue models: Determine the pricing structure and revenue models that align with your target market and business objectives. Research industry standards and compare them with your competitors' pricing strategies. Consider value-added services, volume discounts, and scalability when defining your pricing model.
6. Market size and growth potential: Estimate the total addressable market (TAM) for payment-processing services. Calculate the potential revenue by considering factors such as market size, market share, and growth projections. This will help you assess the financial viability and growth prospects of your startup.
Remember to gather data from reputable sources such as market research firms, industry associations, and government reports. Additionally, reach out to potential clients, industry experts, and mentors for their insights and feedback.
What exactly is a payment facilitator?
A payment facilitator, also known as a PayFac, is a company that provides the infrastructure and technology necessary for businesses to accept credit card payments.
They act as an intermediary between the submerchants and payment processors, simplifying the onboarding and underwriting process by aggregating and managing multiple submerchants under their own merchant accounts.
Payment facilitators offer merchant accounts for online payment processing, allowing retailers to accept card-present (CP) and card-not-present (CNP) payments. This means that businesses can easily integrate with a payment facilitator and start accepting payments faster, without the need for their own merchant account.
Payment facilitators play a crucial role in the payment processing ecosystem, enabling businesses to accept electronic payments and receive the funds from those payments in a streamlined and efficient manner.
Their services are particularly beneficial for small to medium-sized businesses that may not have the resources or expertise to navigate the complex process of establishing their own merchant account.
It's important to note that there are various types of payment facilitators, including Payment Service Providers (PSPs) and Independent Sales Organizations (ISOs), which provide retail accounts for different types of merchants.
These payment facilitators offer a range of services beyond just payment processing, such as risk management, reporting, and customer support.
Overall, payment facilitators play a vital role in simplifying the payment processing journey for businesses, enabling them to focus on their core operations while providing a seamless and secure payment experience for their customers.
How to open a payment processing company?
1. Research your market and industry
Market research should involve a retail business count study—research rivals' offerings and prices. A free survey may include local firms' offerings and contact information. Ask each merchant who they use and how delighted they are on a five-point scale. Request their email addresses to provide survey results.
2. Create a business plan
Plan your business's operations, services, and prices. Determine your sales force size and compensation. Write down how you'll get the funds to start and run the firm. Prepare to market your new business.
3. Partner with bank
Transaction underwriting and interbank routing need a Visa/MasterCard bank. Contact banks in your region or those that serve your targeted market directly, meet with management, and present them with a business plan that includes how PCI compliant payment gateway services can help them build small-business connections.
4. Contact equipment leasing firms
A leasing company may assist cash-strapped small-enterprise owners in financing credit card processing terminals, equipment, and ATMs, generating revenue. Customers can choose: Terminals can be leased for $40 per month or bought for $1,150 or your price.
A majority of clients lease it. The leasing firm will issue you a check for the terminal's purchase price minus their charge.
5. Find wholesale equipment
Get wholesale equipment. To benefit from equipment or compete with other suppliers, you require a distribution agreement with one or more transactions systems manufacturers.
6. Hire salespeople
These individuals will phone and recruit company owners. Most work as independent contractors and are paid on commission or salary plus commission. The management will override all sales force business. You must pay your sales force enough to keep them working, but only so much that your organization gains money.
7. Hire marketers
Your sales force may create business by phoning potential clients and building relationships. Your firm needs a marketing staff for online, digital, print, and broadcast advertising.
How much money is needed to start a payment processing business?
The cost to start a payment processing business can vary depending on several factors such as the features you want in your software, the development tools required, the size of the development team, and the location of your business.
Features: The complexity and features of your payment processing software will have an impact on the overall cost. Gathering a clear understanding of the payment solution details and the desired features will help in estimating the expenses.
Development tools: You will need to invest in the right development tools to design, test, and debug the software. This can include payment stack technologies and development frameworks tailored for the financial sector. The cost of these tools should be factored into your budget.
Development team: You may need to hire a development team to work on the software. Adding more developers can increase costs, as you would need to pay their salaries and benefits.
Location: The location of your payment processing business can also affect the cost. Factors such as office space rental, employee salaries, and other operating expenses can vary depending on the location.
Compliance and security: Payment processing businesses require strong compliance and security measures. You will need to invest in secure servers to host the core database and deploy the application on platforms like AWS or Azure. These infrastructure costs should be considered as well.
It is important to note that the specific costs can vary widely depending on your unique requirements and circumstances. To get a more accurate estimate, it is recommended to consult with industry experts, financial advisors, or specialized consulting firms.
Sum up
Market analysis is a crucial step in any business venture, including the establishment of a payment processing firm. It helps you understand the existing market landscape, identify potential opportunities and challenges, and devise effective strategies to position your business competitively.
By conducting market analysis, you can gather valuable information about customer preferences, market trends, competitor offerings, and regulatory compliance requirements. This analysis will enable you to make informed decisions and tailor your payment processing solution to meet the specific needs and expectations of your target market.
In summary, while purchasing a ready-made payment processing system from Akurateco can provide cost and time efficiencies, conducting a thorough market analysis is essential for customizing your solution and ensuring its success in the competitive payment processing industry.
Don't hesitate to contact Akurateco for assistance in both the development of your solution and conducting market analysis.