February 7, 2024
7 min
Are you interested in helping businesses grow by enhancing their payment capabilities? Then, starting a merchant services business may be the perfect path for you. However, the journey towards industry leadership is strewn with obstacles, and making mistakes as a newcomer can be costly.
This complete guide provides in-depth information about all aspects of setting up credit card processing company. Let’s cut to the chase.
Merchant services definition
To move from easy to complex bit by bit, we’ll start with some basic terminology that every up-and-comer in merchant services should know.
Merchant services are a jumping-off point for every business, enabling them to accept different payment methods, handle multiple currencies, and manage transactions. Partnering with a merchant service provider allows companies to expand their payment options and enter new markets with minimal effort. Such clear advantages generate a great demand for merchant services among businesses of different industries and sizes.
Basic steps to a merchant services business
Ready to enter this lucrative niche? Learn how to start a merchant processing company in just five steps.
1. Understand the industry and market
Your future merchant services company's success depends on the thoroughness of the research you conduct before starting it. Familiarise yourself with the latest payment trends, security protocols, and emerging technologies.
Special attention should be given to the level of competition in the industry. Usually, the bigger providers get more prominent merchants. However, it’s easier for smaller merchant service providers to get local clients on board.
2. Obtain the necessary licenses
Depending on your location, you may need specific licenses to operate as a merchant services provider. Research the legal requirements in your region and obtain any necessary permits from the relevant authorities. Compliance with regulations ensures that you are offering services lawfully and protects both your business and your customers.
3. Decide on the services you’ll provide
Based on the preferences of your target audience, determine the services that cater to their business needs. This may include traditional credit card machine business, payment gateways, online shopping cart integration, and merchant account assistance.
4. Partner with financial institutions
Partnering with banks and PSPs is crucial for your merchant services business success. Look for business partners in your area and contact them with a proposal for cooperation. For starters, it may be just one acquiring bank or payment processor. The more time you are in the industry and the more clients you acquire, the faster your network of partners will expand.
5. Hire a sales team
Financial expertise should be your hallmark in a market where hundreds of payment processing companies offer the same merchant services. Only a few startuppers can afford to hire a team of professionals right from the start, but even a few knowledgeable people can bring your company to the top. Find people who understand the industry and are genuinely interested in the development and success of your merchant services company. The sales team will actively reach out to businesses, showcase the benefits of your services, and close deals.
How to start your own credit card processing company
There are two ways to start working as a merchant services company: from scratch or with a white label solution.
Starting a merchant services business from scratch requires a lot of time and money for tasks like developing software, getting licenses, forming partnerships, and attracting clients. It also involves a substantial upfront investment in a development team, card network fees, and hardware.
If you're on a tight budget and want to enter the market quickly, a white label solution is a simpler choice.
Let’s find out which benefits and pitfalls lie behind the white label solution for aspiring merchant services businesses.
Opting for white label solution: pros and cons
Pros
- Fast start. It will take at least a year and a half to develop your own software, obtain the necessary licenses and pass security and compliance audits. Added to this is the time it takes to hire a team, partner with financial institutions, and find the first clients. With a white label solution, you can get started in a month or even less without wasting time on the most time-consuming processes.
- Less costs. Independent software development requires significant financial investments. In many cases, the cost of a product’s development exceeds the price of a ready-made solution by 20 times or even more. By choosing a white label product, you don’t need to invest in the initial stages of development, release, and support, which is very cost-effective.
- No technical hassle. As we’ve mentioned, opting for a white label platform deprives you of development worries and everything related to the product’s technical side. Your provider’s technical support team will immediately solve all the possible issues, and you can fully devote your time to business processes.
Cons
- Opting for a white label makes you technically dependent on the solution provider, which means you cannot fully influence the product’s structure, features, and performance. However, given the huge market of white label providers, it won’t be difficult for you to find the best fit.
The bottom line
Starting a merchant services business is a long row to hoe, but with the right approach, you can encounter far fewer challenges. Instead of starting all processes from scratch, you can take your place in the market much easier and faster with a reliable white label provider.
Understanding the needs of aspiring merchant service providers, we’ve built a scalable payment platform with cutting-edge tools, allowing you to run a business under your brand without the burden of development and huge costs. Provide advanced merchant services for online businesses within a few weeks, having 400+ connections established for you.
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