What You Need to Know About Choosing a Payment Processor

Today's post comes from our partners at iATS Payments. iATS Payments is a leading provider of integrated payment processing services for nonprofit organizations, including Brickwork, which integrates seamlessly with Salesforce and the Nonprofit Starter Pack.

If you have ever transferred funds through your website, you have used a payment processor in some capacity. Sometimes changing CRMs or website platforms necessitates a payment processor evaluation, and other times you may have an issue with your current system that forces the issue. Understanding your options and what to consider when it comes to choosing a payment processor is very important. Payment processing is a highly complex subject and can be quite confusing, so here are some highlights of what you need to know when choosing a payment processor.

Start with Your Needs

As with any major tech decision, it is best to start by listing your needs before you get distracted by big promises of different solutions. Do you need to accept recurring payments in addition to one-time transactions?  That’s an important thing to consider when selecting a processor.  Also, you should determine whether both types of transactions (one-time and recurring) are supported in the software you’re planning to use.  If you are planning to do a lot of recurring transactions, it’s important to ask if the processor supports automatically updating credit card accounts.  This will keep any recurring payments processing smoothly even if the customer (or donor in the case of nonprofit organizations) gets a new credit card number or if their card expires.   

Also, it’s important to consider what payment methods you’d like to accept.  All major credit cards seem like an obvious choice, but you should consider whether you want to accept ACH (also known as direct debit or pre-authorized debit) as well.  Do you need to accept payments in international currencies or in other countries?  If that’s a requirement, finding out what international processing capabilities are available to you is an important consideration.  Another thing to look into is protection against credit card fraud.  If you’re doing online transactions, you should definitely ask what fraud prevention tools are supported by the payment processor.  

Contract Terms

Many processors have strict terms or restrictions relating to their services, so it’s important to read the fine print before moving forward with any kind of contractual agreement.  There can sometimes be setup or early termination fees which can be surprisingly expensive.  Also, there are payment processors that claim the credit card data relating to recurring transactions doesn’t belong to your company or organization, which is actually not at all true.  However, this can make things complicated if you decide to move to another processor as you may need to contact all your donors (or customers) and ask for their payment details again. It’s critical to address this issue at the beginning to avoid any headaches at the end.     

Data Security

Security of card data is a huge issue these days, so it’s critical to know that your payment processor handles their transactions with the utmost attention to security.  Payment Card Industry (PCI) Data Security Compliance (DSS) is an important requirement and you should only consider working with a processor that can prove they’ve achieved and maintained PCI-DSS Level 1.  Although PCI compliance is currently only a requirement for merchants based in the United States, all organizations should clearly understand how they’re storing, transmitting or receiving card data to make sure their systems and procedures follow best practices for data security.   

Customer Support

Many payment processors only offer a limited level of customer support and some even charge for additional support.  It’s important to find out if customer service is primarily offered by email or if the payment processor also has a team of live customer care agents to address questions on the phone.  At the end of the day, consider what level of support may be realistically required for your organization and choose carefully!

Also, it’s important to find out whether your organization’s name will appear on the credit card statement.  Having your name (and not the payment processor’s name) will help reduce confusion and potential chargebacks.  Chargebacks are when a customer (or donor) disputes a transaction on their credit card statement and can result in unexpected fees and other administrative hassles.  It’s best to avoid chargebacks as much as possible!   

Deposit or Remittance Schedule

How long it takes for your funds to be deposited into your bank account can vary widely from provider to provider.  Some payment processors remit funds within 1-2 business days, whereas others may do so weekly, monthly or only on-demand (when you request the funds).  It’s important to find out exactly how long it’ll take your money to find its way to your account and understand what this might mean for your needs.  Keep in mind that ACH (or direct debit) transactions typically take longer to be deposited than credit card transactions.  

Some processors don’t touch your money at all and deposit funds straight into your bank account while others hold onto your funds until they’re satisfied the charges aren’t fraudulent.  This ‘holding time’ can cause delays in the funds being released to your account, so it’s important to understand the implications of the remittance schedule before you commit to a processor.

Rates and Fees

When comparing fees, it’s important to consider pricing structures.  Some processors may charge Interchange+ rates, which can seem low but are actually variable depending on the specific type of card that’s being used.  Other payment processors, on the other hand, charge flat (or blended) rates.  It’s difficult to draw comparisons between payment processors if their rate structures are different.  Another thing to consider when looking at rates is whether the processor is collecting fees on behalf of the application (or software) provider.  The rates may seem higher at a glance, but it’s often part of the service provided by the software or the result of the integration of the payment processor.     

Summary: What You Need to Know

The payment processing industry is notorious for hiding the nitty-gritty details behind smoke and mirrors, making it often difficult to understand what your organization may be getting into.  Don’t be afraid to ask questions and take your time when making any decision relating to how your organization gets the funds you deserve from your audience. 

Interested to learn more about payment processing as it relates to nonprofits?  Check out the iATS Payments blog or watch our joint webinar with Idealist Consulting on Best Practices in Online Donations.