How to Start a Credit Card Processing Company

Starting a credit card processing company is an excellent option for entrepreneurs that want to get involved with the financial sector.

It may seem like a complex process, but we will guide you through the process in this post.

It's estimated that 63% of consumers prefer using credit cards for non-face-to-face purchases.

With the e-commerce industry soaring, it's no surprise that starting your own payment processing company can be lucrative.

Whether you're a newly established merchant services provider or want to diversify your existing business, learning how to start a credit card processing company will be a great advantage.

So, if you're ready to become a merchant services industry leader, let's get started!

Key Points Covered In This Article

Related: ISO Payments

What You Need to Start a Credit Card Company

Becoming a payment processor requires careful planning and research. To succeed, you must have the right resources and understand the specific regulations for handling customer payments.

One of the first things you want to do is to develop your business model and business plan. This will detail how you plan on growing in the financial industry and what verticals and potential clients you'll be targeting.

Next, you must consider what is required to stay compliant with payment card industry (PCI) standards and local laws.

The most important thing when starting a credit card processing company is understanding the regulations and policies that govern this industry.

Familiarize yourself with PCI compliance rules, contract terms offered by various payment processor networks, and anti-fraud best practices.

You also need to consider how you'll manage customer disputes for the merchants that you serve.

You will need to establish a legal entity for your business, such as an LLC or a sole proprietorship. This will help protect your personal assets if something happens to your business.

It will also give you access to more funding opportunities and make it easier to build customer trust.

Then you'll want to get business insurance. Some of the most common kinds to get are:

There is a wide variety of merchant services companies, and depending on how your business is set up will determine what kind of insurance you'll need.

Spend time researching the different hardware, software, networks, and credit card processing services that you'll offer.

You want to ensure that you provide what your merchants need. For example,

These are all things you should consider when choosing which products you will be offering as a credit card payment processor.

Because of heightened security requirements, the technology used in credit card processing must meet specific criteria set by major card issuers such as Visa, MasterCard, American Express, Discover, etc.

It is essential to choose reputable providers who can offer reliable services, excellent customer service, and technical support.

Finally, developing a sound pricing strategy before launching the business is important.

Think carefully about the rates you want to charge merchants while keeping their best interests in mind.

You should also establish clear terms of use and any fees associated with using the payment processing products you provide them.

Now that you know what it takes to start a credit card processing company, let's move on to step two: establishing a merchant account.

A merchant account enables businesses to accept payments using debit or credit cards from any payment processors network such as Visa or Mastercard. Establishing a merchant account is critical for any credit card processing business looking to move forward in this industry.


Establish a Merchant Account

Setting up a merchant account is the next step in starting your credit card processing company.

A merchant account allows the merchant to accept payments from customers through a variety of payment methods, such as credit cards, debit cards, electronic checks, and other electronic forms of payment.

You need one so you can accept payments from your merchants for the services and products you provide.

One of the significant benefits of having a merchant account is that it makes transactions secure and ensures that customers' financial information is kept safe from fraud.

The account also allows you to process transactions quickly and securely by connecting them with the appropriate payment networks.

A secure merchant account also protects your customers and the business from liability for fraudulent purchases.

On the downside, setting up a merchant account can take some time, require additional paperwork, and may be expensive depending on the fees associated with opening or maintaining the account.

Additional costs need to be factored in when considering setting up a merchant account. These include the following:

Having said this, establishing a secure merchant account is an important step in starting any credit card processing business, as it will protect both the customer's financial information and your business.

Now that you've learned how to establish a merchant account let's move on to selecting the payment processing products you will offer.


Choose Your Payment Processing Solutions

Choosing which products and services you'll offer is one of the most important decisions when starting your credit card processing company.

A payment gateway is a service that authorizes payments between separate entities, such as buyers and sellers.

It connects merchants to participating banks that process transactions and help move money from the customer's account to the merchant's account.

Payment processing solutions help ensure customer security and add convenience for both parties.

There are several important factors to consider when selecting your products:

Customer support should also be taken into account when choosing what you'll be offering.

Many payment processing companies offer 24/7 customer service representatives who are knowledgeable and experienced in handling customer questions and complaints quickly and efficiently.

This is something you'll need to offer the merchants that are choosing you as their payment processor.

Integration with existing systems is essential so all transactions are appropriately documented, tracked, and securely transmitted to the merchant's bank account.

After carefully considering these factors and choosing a payment gateway that fits your needs, you can start building your residual portfolio from merchants through your new business.

The next step in setting up your credit card processing company involves finding the right bank for your company, which we'll cover in the following section.

Finding the Right Financial Institution for Your Company

When you're looking for a bank to process your business's credit card payments, it pays to be selective and take the time to find a reliable partner that suits your company's needs.

While there may be fewer options compared to other financial services, there are still several important considerations when selecting the right bank.

The first thing to consider is whether the bank provides merchant accounts or if you'll need to get one from an independent third-party processor.

Generally speaking, banks tend to offer more competitive rates for merchant accounts than third-party processors, so this could be an important factor when making your final decision.

Another important factor is how responsive the bank is.

Typically, you want a bank that is willing to adjust its rates depending on the needs of your business and react quickly to changes in the marketplace.

No matter which option you settle on, you need to ensure that all aspects of the agreement—including fees, terms, and conditions—are clearly stated before signing any contracts.

By taking these steps now, you can avoid unexpected issues down the line and get up and running with confidence.

Once you have chosen a bank that suits your business's needs, you must decide what terms and fees you'll offer.

Terms and Fees for Credit Card Processing

 

When merchants are searching for a credit card processor, one of the first things they want to know is the terms and fees involved.

Generally, the terms vary from each payment processor, and they can include setup fees, monthly fees, or minimums charged per month.

Some processors have specific rules and conditions that merchants need to be aware of. Understanding these conditions is essential as they are critical in choosing the right processor for your needs.

Most companies charge a varying fee for processing credit cards through their services, typically called an interchange rate.

This is a percentage that institutions like banks or associations take as a fee. The percent depends on which credit card you process and averages around 2–3% of the purchase value. However, it can often be higher or lower depending on the processor and the individual transaction.

Other common fees include:

Most of these fees go up with the volume of transactions, too.

Another vital aspect is payment security measures such as encryption technology, fraud prevention software, and policies like PCI compliance standards.

You should consider these things when setting up your merchant services business. Once you decide on your fees and rates, you are one step closer to offering your services to merchants.

Now let's look at the regulatory requirements you'll need to know.

Regulatory Requirements for Setting Up

 

When starting a credit card processing company, it is important to understand and comply with the regulations that must be followed.

The Payment Card Industry Data Security Standard (PCI DSS) and the Federal Trade Commission's Red Flag Rule are two of the most important regulatory requirements to be aware of when setting up a credit card processing business.

The PCI DSS sets out security requirements and standards that organizations need to meet when handling credit card data. These requirements protect confidential customer information and ensure that transactions remain secure. Failure to comply with the PCI DSS can result in fines or termination of services.

The FTC's Red Flag Rule is a regulation that businesses that process credit cards must adhere to. The rule requires companies to develop written programs outlining how they will detect, prevent, and respond to identity theft attempts made through their credit card processing activities.

In order to meet these requirements, businesses must also have procedures in place to monitor customer accounts for signs of identity theft and take appropriate action when identity theft is detected.

Finally, businesses must be cognizant of other state and federal laws related to consumer protection, financial fraud, data privacy, and anti-money laundering - all of which may affect how a business operates its credit card processing activities.

With an understanding of some of the regulatory requirements, we will focus on how best to set up a system for handling transactions in the next section.


The System for Handling Transactions

 

Credit card processing is a fundamental aspect of any business, particularly in the online and retail spaces. Setting up a payment system for your merchants requires them to select providers, equipment, software, and services.

In order to make sure your clients can offer secure transactions to their customers, your system for handling transactions must be set up correctly.

The main component of credit card services is the payment gateway. This connects to the credit card issuer or processor and provides your customers with a secure environment for purchasing.

When selecting the gateway services you'll be offering, there are many factors to consider. The most important thing to remember when choosing a payment gateway is that it must provide the highest level of security and reliability.

You will also need to offer both hardware and payment processing software depending on the kind of transaction that your merchants intend to process.

Some systems require POS (point of sale) equipment such as credit card terminals, printers, scanners, and barcode readers, while others need a safe connection over the internet with authentication measures in place (virtual terminal.)

Different types of software programs can also be helpful in collecting customer information, processing transactions, and keeping track of inventory levels.

The system for handling transactions must be implemented correctly in order for it to work efficiently and provide the necessary security for your customer's purchases.

By choosing appropriate providers, equipment, software, and services carefully, you can make sure that your merchants can complete their sales hassle-free and securely through your company's payment processing products and services.

Next, we discuss setting up support and customer accounts which provide convenience as well as security while handling customer purchases through your business's credit card processing system.


Support and Customer Accounts Setup

 

Once you have decided to start a credit card processing company, it is important to offer strong customer service.

Customers must be able to reach a knowledgeable and friendly staff if they have any questions or problems with their accounts.

Also, clients need an easy way to set up accounts and manage their activities.

There are several options available for setting up customer accounts. You may opt for an all-inclusive system that provides customers with an "out of the box" solution. This type of system usually requires less maintenance because most processes are automated. The drawbacks are that there may be some limitations with customization, and certain features may not be available.

You could also investigate using third-party software solutions. These systems are highly customizable, have specific industry functionality, and can often be integrated with data sources or other services your clients may need.

On the downside, third-party solutions will require more setup time and ongoing maintenance costs.

Finally, you could build your own custom solution from scratch. This allows you to tailor the system exactly to your customer's needs and specifications, but it is the most expensive and time-consuming option.

Choosing a support and accounts setup system that best meets your merchant's needs while providing them with a positive experience every time they use your services is important.

Whatever option you choose, make sure you provide adequate technical support so they can quickly address any issues they encounter.

Now that we have discussed how to provide ongoing support, it is time to move on to the next step: operating a successful payment gateway.

Operating a Successful Payment Processing Company

Operating a successful business requires careful attention and common sense when dealing with merchant accounts and credit card transactions.

One of the first steps to running a successful payment gateway is identifying your target audience and partnering with the right type of merchants.

Not all merchants might be suitable for your business, so you will want to choose one that fits with what you offer.

Consider the types of payments your merchants will be offering. Do they have any special services (such as subscriptions) they offer? Are they in a high-risk market?

To ensure maximum customer data security, you must adhere to Payment Card Industry Data Security Standards (PCI DSS). This means appropriately securing all customer information stored in databases and implementing strict monitoring of payment transactions from start to finish.

Additionally, you must ensure that all transaction details are captured accurately for each transaction, including shipping address and billing information.

You should also consider options like friendly fraud protection on top of traditional credit card fraud prevention measures when running a successful payment gateway.

Friendly Fraud occurs when a customer disputes a charge on their credit card even though they authorized it initially. Supporting documents like order confirmations and store policies should be readily available if needed during chargeback disputes or other cases involving fraudulent activity detected by payment processors.

Finally, it's important to keep up with changes in credit card processing regulations to stay compliant with industry standards. Keeping up-to-date with new technologies like tokenization can also help minimize processing fees while providing extra security for customers' credit card information.

Overall, operating a successful credit card processing firm involves more than just setting up merchant accounts – it requires taking proactive steps toward preventing fraud and offering high levels of security for customers' personal data.

By following the above steps – from choosing the right processor and adhering to PCI DSS standards to offering friendly fraud protection and staying up-to-date with changes in regulations – businesses can maximize the efficiency of their payment gateways while helping keep customer data safe and become a leader in the credit card industry.


Partner With Electronic Merchant Systems (EMS) Agent Program When Starting Your Credit Card Processing Company!

 

The EMS Agent Program has helped merchant services agents for over 30 years build their payment processing business.

When you partner with us, you'll get a partner that is 100% dedicated to helping you succeed. 

You'll also get access to benefits like:

No matter what type of merchant you are trying to service, we can help you be a leader in the financial services industry. 

With so many great benefits, it's easy to see why credit card processing agents choose us when growing their business.

Call us today at 866-525-7405 to see how we can help you with your professional credit card processing business!