Credit cards are now one of the most popular ways to make purchases because they help provide financial transparency with every transaction. It is estimated that more than 50% of business-to-business (B2B) and government-to-business (G2B) transactions are performed with credit cards.
Credit card processors are third-party organizations that work with the issuing bank, receiving bank, and credit card company. They help authorize the payment and process the transaction. There are a vast number of benefits available to those who work with credit card processors.
Primary Benefits of Utilizing A B2B Credit Card Processor
Instead of checks and old-fashioned invoices, credit card payments enhance the speed of financial transactions. B2B credit card processors make this process even safer and simpler through a variety of means.
A Comparison Between Check and Credit Card Payments
The B2B transaction is first prompted by the retailer who receives an order. They send the order to the supplier, who then creates an order invoice. The retailer reviews and authorizes the invoice. The retailer then sends a check to the supplier. The supplier deposits the check to their bank. This can take months to complete, especially for high-volume orders between businesses.
With a payment that requires a credit card processor, the payment gateway receives the transaction. This data is sent to the acquiring bank that holds the merchant account. The acquiring bank demands authorization from the issuing bank, which belongs to the seller.
The seller’s bank verifies the information by checking if the acquiring bank doesn’t have the funds. The acquiring bank then sends an update to the payment gateway. The transaction is then noted as successful or unsuccessful.
Reduction of Fraud
There are high-level security systems built into the authorization that credit card processing companies require for a successful transaction. This information doesn’t have to be manually verified, and it helps reduce the level of fraud and mistakes. This way there is no worry about checks bouncing.
Credit card processors improve the efficiency of the payment system. They help facilitate credit card purchases, which then makes it easier for accounting and record-keeping. It is easier to keep track of invoices and process debt collection with the use of credit card purchases. A credit card processing system allows you to manage many types of transactions across a variety of mediums.
Checks require a long time to process internationally and are more expensive. Credit card processing companies allow for simple transactions. Multiple currencies can be processed in far less time, and for a cheaper price.
Improved Customer Experience
If you offer payment by credit card, this will attract more customers to you. There is less hassle, and you can provide documented reports to your customers. This improves your transparency and honesty.
Increase in Sales
When customers have a difficult time making payments, this can reduce the number of sales you make. The payment gateway may fail to authorize payments and can make you lose customers. A dependable credit card processing company will prevent this and will drive your sales up.
A Brief Explanation of Interchange Fees
For all intents and purposes, banks make money in three ways from credit card transactions. One is the interest that the cardholder pays. If you maintain a balance on your credit cards, you have probably noticed finance charges accruing. And those interest rates usually aren’t low. If you pay off your card within the grace period, you generally avoid the interest accrual.
Another way that banks make money on your charge cards is by charging an annual fee. American Express used to be known for their annual fee on their base-level card. Like many other creditors, they have started to waive that fee as an enticement to new cardholders.
The third way creditors make money is by charging an interchange fee at the point of purchase. This is a small percentage that the vendor pays for the ability to offer the convenience of credit to their customers or clients. For individual consumers, the merchant or vendor is billed at the highest interchange fee. These are considered to be Level III consumers. Level II consumers are usually businesses that provide a great deal more date with each swipe. Level III consumers are government entities and some secure businesses. They generally provide the most data on transactions. Level II and Level III purchasers warrant the lowest interchange fees. That’s why it’s beneficial for businesses to have the hardware and software that can determine which level of consumer they are dealing with. The savings can be substantial.
Learn More About Credit Card Processing Companies
There is a great number of applications for B2B payment solutions. You can find out how to get started on the process and learn more about how it works.