5 Questions You Should Ask When Setting Up Your Payments (as a Small Business Owner)

Online payments and Small Businesses

As a small business owner, payments can be a tricky area to navigate. The rapid growth of online commerce and digital payments in Europe has changed the payment landscape forever. Today’s consumers want smoother, seamless checkouts while getting maximum protection from fraud. Partners and suppliers appreciate, even expect, quicker payments. For a small business selling online, this presents many issues that need deft handling. Whether it be about choosing the best payment methods, keeping up with new regulations, or staying up to date on the latest payments tech. And all while keeping fraud at bay.

A smooth and secure payment experience helps you engage with your customers, improve conversion, prevent fraud, and reduce chargebacks losses. It is a critical tool to boost sales and win loyal customers. We understand the challenges online businesses face in a dynamic market like Europe. So, to help you design the best payment experience, we have compiled a list of questions that you should ask. If you are a new business that has just started or if you have been actively selling online, then this guide is for you.

1. How do I accept online payments for my small business?

Digital payments in Europe will grow by 70% in the next five years. At the same time, cash usage is falling. According to recent studies, traditional payment methods will account for less than a third of global e-commerce payment volumes by 2025.

Hence, as a small business, you must accept online payments to maximize your conversions. Accepting more payment methods helps you to reach a larger audience and makes it easier for your customers and partners to pay you. A secure payment gateway is essential to accept online payments. It helps you process online payments easily and securely. A payment gateway uses automated processes, thus reducing manual work and saving time, and allowing you to handle more transactions over time. You can build your own payment gateway or take help from a payment service provider.

2. Who is a payment service provider, and how do I choose one?

A payment service provider, or PSP, is a third party that helps merchants to accept online payments. A PSP helps you to accept credit and debit payments (such as credit or debit cards, bank transfers, direct debit, instant SEPA transfers, etc.) by connecting you to a larger financial infrastructure. They provide you with a merchant account and a payment gateway to help you collect and manage your payments smoothly. A PSP also helps you to protect against data breaches and fraud with advanced fraud prevention tools. They can also help you to automate your billing and collection process.

Choosing the ideal PSP for your business depends on various factors, such as your business goals, your industry, location, target audience, risks, annual turnover, etc. A one-size approach might not always work. For example, if you serve customers and process payments within one EU country, you might go with a smaller PSP that operates locally. But if you are looking to reach customers across global markets (or even within the larger EU region), you will need a global PSP with more exposure.

3. What payment methods must I offer for my small business to reach more customers?

Customers today want more choice and flexibility in how they pay. 60% of shoppers in Europe say they would abandon a purchase if they cannot pay with their preferred payment method. But payment methods in Europe vary across countries. Hence, you have to localize your payments to offer what your customers want.

The top 5 must-have payment methods in Europe are:

• Digital wallets
• Credit/ debit cards
• PayPal
• Local payment methods (iDEAL in The Netherlands, Giropay/ Girocard in Germany, Bancontact in Belgium, prepaid cards in Italy, etc.)
• Cash-on-Delivery

Buy-Now-Pay-Later is also growing rapidly, driven by demand from millennials and customers who prefer to pay in installments. In 2021, over 8% of e-commerce payments in Europe were through BNPL, more than twice that of North America. BNPL players such as Klarna, Clearpay, and Laybuy are popular amongst European consumers. It is crucial to have the right payment mix to reach customers in newer markets, improve your payment acceptance rates, and lower transaction costs.

4. How do I ensure my customers have the best checkout experience?

Have a mobile-first strategy. Research shows that over 50% of e-commerce sales in Europe in 2020 took place on mobile. A mobile payment strategy will help you reach larger audiences, build better user experiences and engage with them better. Use analytics and AI to gain deeper insights on customer behaviour and their likes and preferences. This will help you offer more personalized offers and better customer support.

Use payment tokenization to enable one-click payments. Tokenization is a process that converts your customers’ card data into encrypted tokens and saves it on a server. The token can be used to make payments in place of the actual card. You can learn more about how it works here. Reduce payment failures. Use a payment system that minimizes card declines and failed payments. It should be able to detect and remedy failed payments. Automating your payment system enables you to streamline the entire process, from billing to debt collection.

5. How do I protect my small business and customers from fraud and chargebacks?

Keeping your customers and your business safe from fraud is your top priority. AI-based risk management tools can help you track fraud in real-time. In Europe, the revised PSD2 guidelines require you to use Strong Customer Authentication (SCA) to verify payments. To perform SCA, you must use the latest version of 3D Secure, a security protocol that is in use in Europe.

A payment gateway that complies with PCI DSS norms is one of the best defenses against online fraud. A global payment service provider like Novalnet can help you set up 3D Secure and design a secure, PCI DSS-compliant payment gateway.

How Can Novalnet Help?

If you have any questions, you can also reach out to us. Novalnet is a global PSP with deep expertise in working with small and large merchants across Europe. We can guide you in setting up your payments in a manner that best suits your business and customers.

Jose Augustine

Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.