The ultimate payment processor guide for enterprises

Enterprise businesses need to know if their payment processor is up to the unique challenges they face. Use our payment processor guide to see if yours checks the right boxes.

Decoding payment processors: What you should know

Enterprise businesses like yours face a unique set of challenges. High volumes of payments in multiple markets can easily get complicated. Global aspirations may not always be supported by your current tech. And you always want to stay up to date on the latest payment trends. These challenges can leave you wondering if your current provider checks all the right boxes —Not to worry, our payment processor guide can help you figure it all out.

What do payment processors do?

A payment processor is an intermediary between all of the parties involved in making a payment. They help businesses facilitate credit card, debit card, ACH, and other payments. Payment processors take the payment information customers input online or in-store and send it between banks, credit card networks, and the business, which verify the information and authorize the transaction. Then the payment processor finalizes the payment.

You need a payment processor to start taking payments for a business. But processors are more than they appear, especially for large enterprises. Beyond simply being an intermediary, your payment processor can:

• Influence your ability to accept modern payment methods, like PayPal and other digital wallets, Venmo and buy now, pay later options.
• Enable global reach and payment networks that help you enter new markets.
• Affect your authorization rates.
• Help you mitigate the effects of fraud and chargebacks with advanced fraud solutions.
• Offer expertise and tools that help you stay in compliance and adapt to changing times.

Your payment processor is in a position to be a valuable collaborator for your business. If yours isn't doing all of the above, it could be time to revisit which payment processor is best for your enterprise.

How do payment processors work?

A payment processor will handle the heavy lifting when it comes to accepting payments. But what really goes on behind the scenes? This part of our payment processor guide goes over the five key players involved in the process.

The customer

The buying process starts with the customer. They're the ones making the purchase, providing their payment information, and ultimately clicking “buy.” Today's customer expects fast, frictionless payments and if a store doesn't approve their transaction, or doesn't have a good mobile experience, they may look elsewhere. Trust, simplicity and speed are the top reasons for consumers surveyed to make an online purchase with PayPal¹.

The issuing bank

The issuing bank (sometimes called the issuer) is the financial institution that provides the customer with a debit or credit card. The customer’s issuing bank pays your business by depositing funds in your merchant account.

The business

In order to accept online payments, your business needs to open a merchant account, which you can do either through an acquiring bank (sometimes called a merchant acquirer or acquirer) or through some payment processors, like PayPal. When a customer's payment is authorized, the funds will transfer to your acquiring bank and likely land in your merchant account within a few days. While your business is still responsible for monitoring things like fraud, chargebacks, and compliance, the advantage to collaborating with a payment processor is that it can make these responsibilities easier. For example, payment processors typically support a wide range of payment methods, including credit cards, debit cards, and alternative payment methods. This enables businesses to reach a broader audience and cater to customers using different payment preferences and methods across the globe.

The payment gateway

The payment gateway is essentially the customer-facing part of the payment process. It securely connects your website’s checkout page, where the customer enters their payment information, to the processing network. It then returns the network’s responses back to the website and the payment is either approved or denied.

The payment processor

The payment processor takes the information from the payment gateway and handles the authorization and settlement with the banks and credit card networks involved in the transaction. While some businesses use separate vendors for their merchant account, payment gateway, and payment processor, companies like PayPal can take care of all three. Having a direct, streamlined relationship with your payment processor in this way can help you improve your efficiencies and drive top-line growth in new ways.

The process

There’s a lot that goes into successful payment processing, but it’s not as complicated as it sounds. Let's go over simple payment processing steps to see how it works:

1. The customer makes a purchase by entering their information on a checkout page that's connected to a payment gateway.
2. The payment gateway encodes the information to help ensure it is securely transmitted across the internet.
3. The payment processor receives the information and authenticates that it is being sent by its claimed source.
4. The payment processor sends a request to the issuing bank to authorize the amount of funds needed for the purchase.
5. The issuing bank checks their records and sends back an approval or decline.
6. If the transaction is approved, the issuing bank sends the appropriate funds to the merchant acquirer. This is called settlement.
7. The merchant acquirer deposits funds in batches into your merchant account, typically within a few days.
8. If the transaction isn't approved, the business and the customer receive a notification of the decline.

Customers may expect all of this to take only seconds. It's easy to see why your choice of payment processor may make a big difference in the success of your transactions — and your business. So how do you know if yours is providing everything you need?

How to choose a payment processor

Direct payment processors are more than a “set it and forget it” necessity — they can be a revenue generator. Check out the infographic below to determine if your payment processor is a relic of the past or ready for the new era of payments. Then read on for a deeper dive into what really matters for enterprises.

Modern payment methods

At the enterprise level, most payment processors may offer credit and debit, Automated Clearing House (ACH), and the ability to process multiple currencies. But that may no longer be enough for many organizations: global cashless payment volume is expected to continue increasing through 2027.² Businesses are smart to look at all of their payment method options.

• Digital wallets, like PayPal, Venmo, Apple Pay, Google Pay and Samsung Pay, let customers make fast, frictionless payments without providing card details.
• Peer-to-peer (P2P) payments, such as Venmo, allow customers to pay businesses the same way they pay their friends, as well as share purchases on a social feed.
• Contactless payments leverage near-field communication (NFC) or QR codes so customers can tap- or scan-to-pay for in-person transactions.
• Prepaid gift cards are easy to send to customers via email or text and let them pay with their earned rewards.
• Dual-branded cards offer flexibility, as businesses can process these cards on whichever network is supported in their region. Dual-branded cards provide consumers with the convenience and benefits of a general-purpose credit card while also offering enhanced features and rewards associated with a specific brand or retailer. The flexibility comes from the ability to use the card across a broad network of merchants while enjoying unique advantages tied to the co-branded provider.
• Local payment methods let customers pay the way they know and trust. They can include both real-time bank transfers, like Giropay in Germany, iDeal in the Netherlands, P24 in Poland, and Bancontact in Belgium, as well as digital wallets like Mercado Pago and Satispay.
• Cryptocurrency is an emerging payment method to consider: Cryptocurrency payments are expected to see some growth between 2022 and 2029³. Cryptocurrency is converted to fiat to pay the merchant, but it’s important to consider that crypto can be volatile and rise and fall quickly.

Buy now, pay later

Buy now, pay later (BNPL) is another important payment type due to its rising popularity. Global BNPL transactions are predicted to increase by $450 billion by 2026⁴ and are the most popular in northwestern Europe I.⁵ There are plenty of BNPL options available, so it could be worth it to take a closer look, even if you already have a provider.

PayPal Pay Later offers several advantages that can impact a business's bottom line:

• No additional fees: It's included in PayPal checkout, meaning there's no additional fee beyond your existing PayPal rate.
• Helps drive conversion: 67% of PayPal Pay Later users have abandoned a purchase because PayPal Pay Later options were not available at checkout.⁶
• Helps increase average order value (AOV): In the U.S., PayPal Pay Later AOVs are ~10% higher than standard PayPal AOVs for SMBs in the Electronics Vertical.⁷
• May drive repeat business: 66% of Pay Later customers in the US are repeat users.⁸

Frictionless omnichannel experiences

From gated checkouts and long forms to complicated payment methods and false declines, there are plenty of ways to introduce friction into the payments process. That means there are also plenty of ways to improve your checkout and delight your customers. The right payment processor can provide consistently great experiences across mobile, desktop, apps, and in-person, using features like:

• Buy buttons (like the PayPal buy button), can facilitate 46% faster checkouts compared to those that do not use a buy button.⁹
• Payment vaults to securely save and automatically update payment information for quick, seamless future checkout.
• Automatic billing and recurring payments for subscriptions, premiums, and more.
• Contextual commerce, which allows you to connect with collaborators to share seamless purchasing opportunities with your customers.

Enterprise payouts

The ability to quickly and securely send refunds, rebates, rewards, and commissions around the world is essential for many enterprises. Taking a “set it and forget it” approach gets the job done, but some of the best payment processors for ecommerce can help you find efficiencies and optimize your payouts. PayPal’s payout capabilities can:

• Help avoid expensive currency flips and foreign exchange fees thanks to funding abilities in more than 28 currencies.
• Quickly disburse payments to 200+ markets and easily enable payees to transfer funds in their preferred currency.
• Allow you to submit payment instructions using a secure batch transfer, easy web upload technology, or direct integration. This can allow you to focus on core business activities while your payment transactions can be processed in a timely and secure manner.
• Manage complex global payment regulations and compliance requirements with ease.
• Handle large payout volumes, like enabling $250 million dollars be sent to approximately 200,000 customers within six weeks for Southwest Airlines.¹⁰

Security features

Fraud is a big deal for enterprise organizations. In one survey, the organizations represented said they lose an average of $3.7 million per year due to fraudulent online transactions.¹¹ The most common types of fraud were chargeback, account takeover (ATO), and transaction fraud.¹² Your payment processor can help with these issues by:

• Helping you mitigate fraud efficiently with embedded authentication, tokenization, 3D Secure, and compliance controls.
• Using advanced machine learning that adapts to evolving patterns in real time.
• Leveraging deep and unique data sets.
• Providing chargeback dispute resolution.

Global scale

Enterprise businesses are often looking to scale their business and reach new customers, and they should ensure that their payment processor will support their entry into new markets. A truly global payments platform provides local payment capabilities as well as support. For example, PayPal can help you to:

• Expand to over 200 markets and unlock more than 50 currencies , plus local payment methods.
• Access our network of 432+ million active accounts.
• Leverage local banking relationships to help optimize acceptance rates.
• Contact dedicated support teams in every market we serve.

High authorization rates

Frictionless payments aren’t just about the front end customer experience. You want top-performing authorization rates on the back end to help drive revenue for your business. Using processing tools like payment vaults, account updater, and network tokenization helps keep card data fresh and accurate to drive authorization rates. PayPal’s network processed 6.3 billion payment transactions in Q3 of 2023 alone,¹³ providing us with unique data from both customers and merchants that continues to enhance our authorization process.

High availability

All those happy customers won't be able to make a purchase if your payment processor isn’t operational. If payment technologies crash during times of high volume, like Black Friday or the first day of ticket sales for an event, so could your revenue.

Flexibility and streamlined onboarding

Enterprises shouldn’t have to settle for legacy platforms and hard-to-integrate technology that slows them down just when they need to be more agile and adaptable. Even high volume payment processors with a comprehensive suite of solutions and massive global scale can provide flexible solutions that won’t overwhelm your team. For example, PayPal can:

• Flex to your tech stack and unique business needs.
• Use enterprise plug-ins to easily integrate with the ecommerce platforms, billing software, CRM systems, and shopping carts you need.
• Allow customization with code, APIs, and SDKs designed for developers.
• Provide streamlined payment processor onboarding that allows you to turn on what you need and keep the rest in your back pocket.
• Assign you a dedicated support team to guide you through the process via live phone support and tickets.

At the end of the day, which payment processor is best for enterprise organizations may not be the same as those that work well for small and medium-sized businesses. Look to a payment processing guide that addresses your specific challenges — and look to a payment processor with the expertise to solve them. Download this checklist for easy reference during your search, and remember, we’re here to help.