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Starting a Credit Card Processing Company – A Complete Guide

Do you want to start a credit card processing company online? If YES, here is a complete guide to starting a credit card processing business with NO money and no experience.

Okay, so we have provided you an in-depth sample credit card processing business plan template. We also took it further by analyzing and drafting a sample credit card processing service marketing plan backed up by actionable guerrilla marketing ideas for credit card processing businesses. In this article, we will be considering all the requirements for starting a credit card processing business. So put on your entrepreneurial hat and let’s proceed.

If you intend to start a credit card processing business, you will need to know that your new company will provide services to businesses that need to process payments from their clients. Your service will also include providing the equipment that will be used by your client to not only process the payments but to also send and approve the transactions between the back accounts of your clients and their customers.

What Does It Take to Start a Credit Card Processing Company?

This business would require you to carry out a thorough research on existing credit card processing businesses, what they do, how they work, and the services they offer. Another aspect of the business that you would need to know thoroughly is how the credit cards machines work, which would require you getting in contact with the credit card machine producers.

You would need to choose your niche market either by providing services to retail businesses through merchant accounts – which is a type of bank account that allow businesses accept clients’ payment; or to online businesses through payment gateways – which is an application service that allows online businesses accept clients’ payments. If you are going to be running a medium or large scale business, you might decide to offer both services, however if you are starting on a low scale, you might choose just one of the services.

One of the most important aspects of this business is meeting and establishing relationships with many banks and financial institutions, especially ones that hold memberships from MasterCard, Visa and Discover Card. Having a relationship with many banks will also boost the confidence of your clients both existing and potential.

If you are going to specialize in merchant accounts, you would need to ensure that your relationships with banks are physical in nature. However, if you are going into payment gateways, you would need to have relationships with online banks.

Apart from having a relationship with banks, you will also need to establish relationships with developers of credit card machines. You might need to send an introductory letter physically or send a mail to them letting them to know that you are a credit card processing company that is interested in their products.

Even though there are popular credit card machines in the United States, you might need to deal with more than one brand so that your clients could have more options, which will give you an edge over your competitors who are offering their clients limited options.

Starting a Credit Card Processing Company – A Complete Guide

  • Industry Overview

The credit card sector has grown to be a large and profitable segment of financial services. The payments industry when viewed broadly is not only large and growing which is due largely to its stability and predictability in volume transactions combined with low capital intensity, but it is also highly profitable.

In emerging markets, the growing middle class as well as expanded consumer activity is still largely an untapped pool for payments companies especially those that involve mobile money applications, especially as cellular penetration tend to be high in such regions.

  • Interesting Statistics About the Starting a Credit Card Processing Industry

The industry has however had challenging factors thrown at it in developed economies due to the shock of the global recession; which has forced financial institutions to tighten credit standards and also caused consumers to deleverage.

Another factor also includes increased regulation and zero cost of money which has caused interest rates spread to be minimized, thereby leading to lower margins, and forcing credit card processing companies to look for new streams of revenue. Also, large offline and online merchants have seen an increase in their market share which has cause a stiff rivalry between these merchants and financial institutions.

Between 2011 to 2016, the credit card processing and money transferring industry has experienced strong revenue growth especially as merchants have continually reaped the benefits of a large scale implementation of electronic payment technology as well as the growing e-commerce. The industry has revenue of $55 billion with a growth of 5.7% between 2011 and 2016. There are also about 2,497 credit card processing companies in the United States.

Consumer confidence in this industry is expected to be on a continual rise, which will then cause an increase the amount customers spend, thereby triggering an increase in transaction volumes. Also, industry operators will be expected to expand their services online as they will cause merchants of all sizes to accept electronic methods of payments that will become a standard amongst consumers.

The top four industry players in the credit card processing and money transferring industry are expected to bring in an estimate of 44.8% of industry revenue in 2016. The industry is a fragmented one especially as it comprises a wide variety of companies who have different specialties.

Services provided by this industry are nearly every type of financial transactions which include check processing, wire transfers, automated clearinghouse (ACH) payments, credit card purchases as well as debit card servicing. Also, due to growing technology, new innovative and technically inclined merchants are entering into the industry and are already claiming a share of the markets.

Since a sense of recovery has now been felt by consumers, most of them are going back to their pre-recession habits, especially as higher disposable incomes have boosted their confidence in making purchases as well as using financial services. There have also been more rewards and schemes within credit card services than there are for other financial products.

Starting a Credit Card Processing Company – Market Feasibility and Research

  • Demographics and Psychographics

The demographic and psychographic compositions of those who use the services of a credit card processing company are large, as it ranges from the following;

  • baby boomers
  • corporate executives
  • home owners
  • unemployed adults
  • young adults and a host of other consumers who need credit cards to be able to make product purchases or pay for services either offline or online.
  • Large corporations
  • small businesses
  • Online ecommerce sites are all those who require the services of a credit card processing company to ensure that their business runs smoothly.

List of Niche Ideas within the Credit Card Processing Industry

The niches in the credit card processing industry are uniform in nature, as almost all processors offer the same services to their clients with some going the extra mile to offer additional related services to their clients so as to have leverage over other competitors.

Some of the areas of specialization in the credit card processing business include;

  • multi-currency transaction processing
  •  web hosting, online stores
  •  hardware provider
  •  processors for retail stores
  •  Processors for non-profit organizations and a host of others.

One thing about these areas of specialization is that small scale companies will either focus on specializing in one or two of the above mentioned areas. Large companies however may be able to specialize in more areas.

The Level of Competition in the Credit Card Processing Industry

The credit card processing companies is a tricky business to run especially as you would need to deal with many channel agents which would determine how smoothly your business would run. There are rates that are fixed regardless of whether you are running your business on a small, medium or large scale, as long as you are using the same number of equipment, the charges are the same.

However, it is easier for smaller credit processing card companies to get the local clients in their regions, while the bigger card processing companies get bigger clients due to relationships maintained overt time as well as the capability to be able to handle these kind of clients. In bidding or competing for government contracts, it is usually easier for the large scale credit card processing companies as they have leverage over the small scale companies.

List Of Well – Known Brands in the Credit Card Processing Industry

Every industry usually have the best brands which stand out from the rest, the same is true of credit cards processing companies. The best credit card processing companies are those that have the unique needs of a business in a mind, while also striving to be budget friendly. Some of the well known credit card processing companies in the United States of America include

  • Emerchant
  • Credit-land
  • Payline Data
  • Flagship Merchant Services
  • Payment Depot
  • PayPal
  • Stripe
  • TSYS Merchant Solutions
  • 2CheckOut.com
  • Authorize.net
  • ClickBank.com

Economic Analysis

The credit card processing industry is a volatile one that is subject to the state of the economy and so if you intend to start this kind of business, you will need to thoroughly investigate and know what challenges and pitfalls abound so as to make a sound decision about entering the market.

The industry had recently had a challenge especially during the recession period where there were less disposable incomes which resulted to consumers only making basic purchases. However, the economy has been experiencing a steady growth since 2015, which has led to an increase in the confidence of consumers and their purchasing abilities.

Merchants that mostly charge per transactions have therefore seen an improvement in their revenue as opposed to years by which the recession occurred. This is why an economic analysis is necessary if you intend to go into this kind of business.

Regardless of your budget, you will need to ensure that some certain aspects of the business receive more attention, such as how to get more customers and retain them, how to make your services better for your clients. This business is one that thrives depending on the demand volume, which can only come about if you offer efficient and effective services.

Is a Credit Card Processing Business Worth Starting from Scratch or is Buying a Franchise Better?

 

Any serious minded entrepreneur who is ready to start the credit card processing business will find that even though it is tougher to start from the scratch, it might be more beneficial for them in the long run. Starting your business from scratch ensures that you know your business intimately than someone who has bought a franchise.

Starting from scratch comes with its pitfalls as you will have to deal with paper work as well as the challenges of attracting customers to your business, however, if you have carried out a thorough research before starting this business, then you might encounter less challenges than you should.

Buying a franchise is not a bad business decision but just depends on the preference of the entrepreneur. Some entrepreneurs just prefer someone else handling the rough aspects of the business such as strategies to attract customers, as well as handling the heavy aspects of paper work; while they concentrate on the other aspects such as retaining the customers and other light paper work. However, in a franchise major decisions are off your hands.

Possible Threats and Challenges You Will Face When Starting a Credit Card Processing Business

The threats and challenges you are likely to face when you start your own credit card processing business includes, global economic downturn which is likely to affect how consumers use their credit cards, poor equipment from credit card machine manufacturers, competitors, glitches in the processing system and a host of others.

As an entrepreneur, there is no way you can avoid threats and challenges to your business, however, you can minimize its impact on your business by ensuring that there are plans in place to combat these challenges and threats, so as to make the best out of it when they occur to your business.

Starting a Credit Card Processing Company – Legal Matter

  • Best legal entity to use for a Credit Card Processing business

A legal structure is one of the most important decisions an entrepreneur takes in the course of starting a business. This is because the entrepreneur has to decide on which legal entity will best serve the interests of his company. Another factor that might help in deciding what legal structure might eventually be picked is the financial resources available for start up.

It is however important to seek the advice of professionals who have helped other credit card processing companies start-ups. These professionals would best guide you on which legal structure to pick depending on your budget and kind of business.

There are various kinds of legal structures you can choose when starting your credit card processing business, which include; sole proprietorship, partnership and Limited Liability Company (LLC). Each legal structure has its own advantages and disadvantages, which is why you would need to study them thoroughly before you pick them.

The sole proprietor legal structure is fair if you are looking to start on a small scale and aren’t looking to expand just yet, you could also start as a sole proprietor and change the structure once your business expands. Going into a partnership will require you pooling resources with someone else to the business. A Limited Liability Company on the other hand is one that limits your personal risks in the business, and where your business can operate as a separate entity to yourself.

Catchy Business Name ideas Suitable for a Credit Card Processing Business

  • Payment Terminal
  • Credit Solutions
  • Tint Merchant
  • Gateway Solutions
  • Mining Gateway

The Best Insurance Needed for a Credit Card Processing Business

Insurance is mightily important to any business as it helps you limit the risk that exists while running the business. Regardless of what legal structure you use, you would need insurance if you are serious about your credit card processing business.

If you aren’t clear on the insurance policies to pick, you can seek the guidance of a professional insurance agent or broker for help on the best insurance that would best suit you and your credit card processing business, and any other additional services you might be offering.

If you intend starting your own credit card processing business in the United States of America, these are some of the basic insurance cover you might need to consider purchasing;

  • Errors and Omissions
  • General Insurance
  • Liability Insurance
  • Business owner policy group insurance
  • Equipment Insurance
  • Health Insurance

Does a Credit Card Processing Company Need Intellectual Property Protection?

The credit card processing business is basically a service based business and so if you are thinking that you might require intellectual property protection to start this business, you needn’t bother as no one in this business considers having intellectual property protection a priority.

However, if you have a unique company logo and or brand statement, you might consider buying intellectual property protection; otherwise there is absolutely no need at all.

Is Professional Certification Needed to Start a Credit Card Processing Company?

If you are looking to start a credit card processing company in the United States of America, then you do not need to consider getting professional certification as it is not regarded as necessary.

However, since this is a financial industry, you would need to be aware of what laws, regulations, permits and licenses that you might be required by the federal and state authorities to possess. The credit card processing industry is a closely regulated one especially as you would be handling the sensitive information of customers.

List of Legal Documents You Need to Run a Credit Card Processing Business

Listed below are some of the basic legal documents that you would need to possessed if you want to successfully run your credit card processing business in the United States of America;

  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Insurance Policy
  • Non Disclosure Agreement (NDA)
  • Operating Agreement
  • Contract Document

Writing a Business Plan for Your Credit Card Processing Business

Every business requires a business plan if they intend to start operating competitively and making profits. A business plan helps you carry out thorough research that allows you know whether you need to bother going into the business or not. This would mean that you would require a comprehensive business plan that will give you a clearer picture on how you intend to run your business successfully.

A business plan is a document that offers you a clear guide that will show how you intend to run your business, also, the document is one that helps in influencing the major actions and decisions you intend to take during the course of running the business.

The aim of writing a business plan is so that your stakeholders and investors know how serious you are taking your credit card processing business as your document will show them all the all the strategies you will use in managing your business.

Your business plan should contain important components such as how you intend to generate your start-up capital, how you intend to attract your clients, and also what plans you have towards expanding your business. Other key components that your credit card processing business plan should have include;

Executive summary which gives a description about your company and clearly states what your credit card processing business is all about, your sales and marketing strategies, your marketing goals, your target market and why you are unique from your competitors.

Finally, other key components that should not be missing in your business plan are what products and or service you intend offering, SWOT analysis, marketing and sales strategies, pricing, costing and financial projection, publicity and advertising strategy, and how you intend to generate your start – up capital.

Not everyone is skilled in drafting a comprehensive business plan, and if you are one of such entrepreneurs, then you can get the aid of a business plan writer to help you write out a business plan. However, if you are operating on a tight budget, you might consider going online and getting a business plan template online to aid you in writing your business plan.

A Detailed Cost Analysis for Starting a Credit Card Processing Business

If you carry out a thorough research, you will find that the cost of starting your credit card processing business is something that can be done if you are determined enough, especially as some things might be fixed or varied depending on whom your vendors are.

While the start-up capital might not be as low as some other businesses, but it will be not as high as other capital intensive businesses; and so if you are determined you should be able to start the business. The business is one that is lucrative especially as almost every business requires a credit card processing point especially as most customers do not like carrying cards around.

If you intend to start your own credit card processing business in the United States of America, you might need to ensure that most of the below listed items have been met so that you do not run afoul of the laws.

  • Total incorporation fees would cost $750
  • Liability insurance, permits and licenses to run the business would cost $2,000
  • Amount needed to acquire an office working facility for at least a year will cost $40,000
  • Amount needed to equip the office with computers, machines, printers, furniture, telephones, filing cabinets, as well as security gadgets would cost $5,000
  • Cost of launching an official website would cost $1,000
  • Additional expenditure such as business cards, adverts, signage, publicity would cost $2,500

From the above listed items, if you intend starting your credit card processing business on a small scale in the United States of America, you might require to have an average of $51,000.

If however, you intend to run your credit card processing business on a small scale, you might require $100,000 as start-up capital. If however your intention is to start your credit card processing business on a large scale in the United States of America, you should be looking towards raising more than $200,000 as your start-up capital.

Financing Your Credit Card Processing Business

Every entrepreneur who intends to start their own business knows how important finance is to a business. Not having the required finance to start or run a business is likely to see the business crumble no matter how fantastic the business idea might be. This is not to say raising capital for your credit card processing business would come easy but it is a task that every serious entrepreneur must undergo.

This is where the importance of a business plan comes in. if you do not have a comprehensive business plan, and then you might find it hard to attract serious minded investors when sourcing for capital. No serious investor will listen to your idea without seeing a document that shows that you not only intend to take your new business seriously but also that you know exactly what will become of your business in five years time.

So, you really need a business plan if you do not have the required capital necessary to start the business. As an entrepreneur, there are several options that are available to you when you it comes to raising finance to start up your credit card processing business. Some of the options are;

  • Applying for a loan from the bank and other financial institutions
  • Approaching and raising money from interested investors
  • Raising money from business partners
  • Pitching your ideas to angel investors and getting funding from them
  • Sale of personal properties and stocks to raise required finance
  • Sourcing for loan from family members and friends

Choosing a Suitable Location for a Credit Card Processing Business

Another factor that can make or mar your credit card processing business is in choosing a location for the business. It is very important that when you want to set up your business, you carefully pick a location that will not only be convenient for your target market but also conveniently accessed by your staff and consumers as well.

If you are going to open your credit card processing business, then it would not be to your best interest to locate your business in a residential area such as the suburbs as no one would patronize your business and it might not be convenient for business owners who want to visit you physically to make enquiries, so it would be best if you locate your business in an area that has a concentration of businesses especially ones that are your target market.

While your location is quite important, it is not necessary that you rent or lease a huge office facility that would cause a strain on your finances or budget, there is absolutely no need to break the bank. You would only need a small space where you can have a receptionist and an inner office for those who wish to make enquiries.

This is a sensitive business that would not need you working from home especially when you are handling more than one client. Also, since you are likely to employ people who would work for you, regardless of the scale – small, medium or large – you would need to lease a working facility regardless of its size that would make your staff and your customers take your credit card processing business seriously.

Starting a Credit Card Processing Company – Technical & Manpower Details

In starting this business, most of the equipment that are used in launching a credit card processing business are fairly the same, the only difference is in the brand used. You should ensure that you get only the best equipment so that they could last your clients for a very long time.

If you are thinking on starting on a small scale, you might need to get less equipment than you should if you were starting on a medium or large scale. Some of the equipment that you would need to fully start your credit card processing business includes;

  • POS Machines
  • Computers
  • Phones

Due to the sensitive nature of the credit card processing business, you might need to lease a small facility. If you must get a larger facility, it must be due to the fact that you are either running a medium or large scale business and are going to be employing competent staff to help in running the business.

Regarding the number of employees needed to run your credit card processing business, it varies depending on the scale of business you intend to run. You might need to employ a manager, marketing executives, sales people, receptionist, and accountant. This is about 7 to 10 people.

The Service Delivery Process in the Credit Card Processing Business

The process involved in the credit card processing business is exactly the same no matter how large or small your business is. The processes range from establishing a relationship with the banks and financial institutions, and also having a relationship with credit card machine brands so as to be able to give your clients options.

Other processes involve website domain and hosting as well as design services and other related services.

Starting a Credit Card Processing Company – A Complete Guide – The Marketing Plan

  • Marketing ideas and strategies for a credit card processing company

Marketing is an essential part of any business as it is what generates income for your business. Marketing involves promoting your goods and services in such a way as to enable clients buy from you. In marketing, you would need to use conventional and unconventional means to achieve your aim and to avoid breaking the bank.

If you intend running a credit card processing business that will bring forth revenue, then you should take your marketing strategies seriously. Before you can confidently market your credit card processing business, you must be sure that you are in a good relationship with banks and financial institutions, as well as credit card developers and machine producers. This is so that you know exactly what you tell your potential customers.

Some of the marketing ideas and strategies that you might need to adopt in marketing your credit card processing business include;

  • Ensure you introduce your business to clients and stakeholders, as well as managers of large corporations.
  • Promptly bidding for contracts
  • Listing your business in local directories
  • Advertising your business in newspapers, magazines, television and on radio
  • Through direct marketing
  • Ensure you leverage on the internet and use social platforms to promote your business

Factors That Will Help You Get the Right Product Pricing for your Credit Card Processing Business

Every business needs to make the important decision of setting the right price for their products and services. Setting the right price is however dependent on a number of factors which include competitors, environment, as well as services offered.

You would need to ensure that you set your rates fairly to your clients in accordance to what they are being offered. You can give your clients the option of a monthly charge or having to charge a percentage after each transaction on the machine. Just ensure that your overhead costs and operational costs are covered by your rates.

Possible Competitive Strategies for Winning Your Competitors in the Credit Card Processing Industry

The credit card processing industry is fairly competitive and so businesses strive amongst themselves to be able to attract customers into using their services, this can be done by either providing excellent services, cheaper rates or additional services that your competitors aren’t offering. If you intend to win your competitors, you must ensure that your business is packaged in such a way as to give you leverage over your competitors.

One of the competitive strategic ways that you might need to adopt in order to win your competitors in this particular industry is to ensure that your clients are given the option of picking what charges they would be comfortable with; this is apart from the fixed charges they would get from your channels.

Another competitive strategy for you is to ensure that you offer several related credit card processing business.

Possible Ways to Increase Client Retention for your Credit Card Processing Business

The credit card processing business is a sensitive one that if not handled properly can allow you lose customers, thereby setting your business up for failure.

According to research, businesses spend more in attracting customers than in retaining them, so it is in the best interest of any company to find ways to retain their customers. Retaining customers also has its benefits as loyal customers who are satisfied with your services are likely to help advertise your business via word of mouth (referrals).

Customers will remain loyal to a company who they feel answer their enquiries or attend to their complaints promptly. There are times that issues might crop up between your client and their customers, your ability to resolve such complaints promptly will give you an edge over your competitors.

Strategies to Boost your Brand Awareness and Create a Corporate identity for your Credit Card Processing Business

If you intend to make your credit card processing business stand out, then there is the need to create strategies that will not only boost your brand awareness but also create a corporate identity for your business. If however, you feel overwhelmed by what strategies you would need to create, you might hire an expert to help you handle that particular aspect.

Some of the strategies you would need to leverage on if you intend to boost your company’s brand as well as promote your business include;

  • Ensure that your credit card processing business is advertised in newspapers, magazines, TV and radio stations.
  • Promote your credit card processing business online via directories and official website
  • Use social media platforms such as LinkedIn, Facebook, Twitter to your advantage to promote your credit card processing business
  • Ensure that you distribute your fliers and handbills in target areas
  • List your business in local directories

Creating a Suppliers/Distribution Network for your Credit Card Processing Company

If you are going to run a credit card processing company, you would need to source for credit card machines, create a relationship with banks both offline and online, and also be in a relationship with credit card developers. These are the essential parties that are needed for you to run your business smoothly.

Your business is bound to become better if you are in a good business relationships with the various parties needed to make your credit card processing business run smoothly. Being in a good business relationships allows you to get some tips and advice from your vendors that will enable you execute your jobs without delay.

Aside from getting tips to help your company grow, a healthy relationship with the above parties will help improve the bottom line of your company, ensuring your business grows and expand, bringing you more revenue.

Tips for Running a Credit Card Processing Business Successfully

The credit card processing business is one where a company provides services to businesses that need to process payments from their buying clients. The service provided also includes giving out the equipment that will be used by your client to not only process the payments but to also send and approve the transactions between the back accounts of your clients and their customers.

Also, there are other related services that can be offered so as to be successful in the business. In order to run this business successfully, you must ensure that your services are what will meet the needs and requirements of your clients, as well as be affordable.

Clients always love a company that not only anticipates their needs but also ensure that their complaints as well as enquiries are promptly attended to. Ensure that you charge your clients fairly and have no hidden charges; this will ensure that your clients trust your service and happily refer others to you.

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