In this article, we’re taking a close look at the meaning of payment processing, its related services, challenges, and how to establish merchant relationships for your offshore or international company.
This is part of our free series on offshore payment processing and the solutions that international business owners can access for their companies.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Payment Processing Meaning
- Why Is Payment Processing Important?
- What Are the Steps in Payment Processing?
- How Does a Payment Processor Work?
- Frequently Asked Questions
- Ready to Explore Your Options?
Payment Processing Meaning
Payment processing, meaning the collection and processing of customer funds, is integral to businesses selling products and services online. In most cases, when searching for payment processing, business owners are seeking payment gateways that integrate directly into their websites.
That said, there is a wide range of payment processing options available. The one that you choose almost always depends on the value of transactions you process, the industry your business operates in, and the country where your company is registered. Depending on these (and other variables), you may find that a basic processing platform or a full-fledged payment acquirer, best meets your needs.
Likewise, depending on where your clients are based (and payments are coming from), one payment processing option may be better suited than the others. This is especially true if you are receiving customer funds from higher-risk countries like China, India, various countries in Southeast Asia, and elsewhere.
It’s important to consider all of the available options before selecting which is best for your needs. With this in mind, here is a look at some of the more popular international payment processing options, meaning they support multiple jurisdictions.
- Stripe
- Adyen
- Square
- Authorize.net
- PayPal
- Paddle
- 2Checkout
- GoCardless
- Cleverbridge
- FastSpring
- Braintree
Here are a few important factors to consider when deciding where to open:
- Does the payment processor support the country of business registration?
- Does the payment processor support your desired currencies?
- Are you required to have a local tax identification number?
- Is the business required to have a resident manager?
- Will the payment processor require your business to have a local bank account?
These are just a few of the factors you will need to consider when choosing a payment processor. Of course, if you are looking for international or offshore payment processing, there are a number of other factors you will need to consider as well.
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Why Is Payment Processing Important?
Payment processing is important because it enables online businesses to accept payments from customers around the world. In most cases, this is achieved with direct integration of a payment gateway into the business’ website, eliminating the need for additional service providers or merchant services. In short, selecting the right payment processor allows businesses to quickly and easily sell their products to a global audience.
What Are the Steps in Payment Processing?
The steps in payment processing involve the customer, the merchant, a gateway, an acquirer, the card network, and an issuing bank. These steps are:
- The customer initiates the checkout process via a payment gateway
- Customer inserts credit card and billing information
- The merchant sends the information from the gateway to the acquirer
- The acquirer confirms the transaction with the card network and issuing bank
- Approval or denial is sent back to the customer through the gateway
How Does a Payment Processor Work?
As mentioned above, payment processors work by completing a series of steps involving customers, merchants, gateways, acquirers, card networks, and issuing banks. When using a payment processor, neither the customer nor the merchant sees the majority of these steps.
Credit Card Transactions
Credit card transactions refer to payments that are processed by a merchant for the sale of goods or services to a customer. When dealing with online businesses, credit card transactions are generally processed through an online payment gateway and payment processor, which are integrated into the merchant’s website.
Payment Gateway
Payment gateway refers to a service that integrates into a merchant’s website, allowing the business to accept customer payments without navigating customers away from the online shopping cart. In many cases, payment gateways and payment processors are directly integrated, eliminating the need for additional services.
Open a Merchant Account
Importantly, before opening a merchant account with a payment processor, you will need to register your business and receive all of the supporting documents.
Additionally, in most cases, your business will need a bank account in the same jurisdiction in order to receive payments from the payment processor directly.
Lastly, each payment processor has its own account opening requirements and restrictions. So, if you are trying to determine which payment processor is best for you, you should also consider which payment processors you can realistically access for your business.
Frequently Asked Questions
Below are two of the most common questions that we receive from people looking into the payment processing meaning. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
How Long Does Payment Processing Take?
How long it takes for payment processing to complete and for the funds to be available in your business bank account will depend on the payment processor, their specific terms, and the unique conditions of your account. In certain instances, payments are only released after 24 to 48 hours, while in other cases instant deposits are available.
What Is an Example of a Payment Processor?
An example of a payment processor is a company like Stripe, Adyen, Square, Authorize.net, PayPal, Paddle, 2Checkout, GoCardless, Cleverbridge, Fastspring, Braintree, and others.
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