7 Best Payment Processing Companies for Small Business (2024)

With the decline of cash and diversification of popular payment methods (consumers can now use credit cards, Apple Pay, and PayPal, for example), accepting payments in 2025 isn’t as simple as stacking bills in a cash drawer. So, how can you ensure your customers’ payments end up in your business’s bank account? You need a payment processor. 

Learn how payment processing works, read about seven payment processing options for small businesses, and discover tips to get the most from your payment processor.

What is payment processing for small businesses?

Payment processing is the critical business function of moving payments for goods and services between bank accounts—from the bank account linked to your customer’s debit card to your business’s merchant account, for instance. 

Small businesses need payment processors to manage money that isn’t cash and checks, from debit cards and digital wallets like Apple Pay and Google Pay to credit card payments. 

Payment processing is an essential merchant service. Other critical merchant services include payment gateways, point-of-sale (POS) systems, and merchant accounts. 

Ultimately, you can consider a payment processor as an intermediary between your customer, your customer’s bank and credit card company, and your business. 

How payment processing works

Payment processors go through a few steps to move your customers’ funds into your business’s bank account, which generally takes one to three days. The steps are:

1. The customer pays via POS system (in-person) or payment gateway (online).

2. The payment processor receives the payment details. 

3. The payment processor forwards the payment info to the card issuer.

4. The card-issuing bank verifies the funds and authorizes payment.

5. The payment processor settles the transaction.

In the final step, the card-issuing bank transfers your customer’s funds into your merchant account. If you plan to accept credit and debit card payments, a merchant account serves as a necessary bridge between the card issuer and your business account. Funds are usually held in your merchant account for a few days before being transferable to your business account.

Types of payment processors

There are two types of payment processors: payment service providers (PSPs) and merchant account providers. Their main differentiator is how they manage merchant accounts. 

Here’s how they work:

Payment service providers (PSPs)

PSPs send your customer’s funds to an aggregate merchant account—a merchant account you share with other businesses. PSPs offer streamlined onboarding and relatively simple payment structures.

If you’re a Shopify merchant, you can quickly turn on Shopify Payments (a PSP) to accept payments immediately.

Merchant account providers

Merchant account providers give you an independent merchant account, but before you get it, your business must undergo the underwriting process to assess potential risks. To complete the paperwork, you’ll provide details like your average transaction size and delivery times. 

Although onboarding with a merchant account provider can be complicated, they’re likely less expensive than a PSP if your business has high sales volumes.

What to consider when choosing payment processing for small businesses

Consider features, pricing models, and retail tech stack integrations to choose the right payment processor. 

Transaction fees

Transaction fees differ by payment processor and payment method. For example, you’ll pay more when customers use credit cards than you will for debit or ACH payments. Consider which payment type you expect to see most, and select a payment processor that offers a competitive rate.

You should also consider where most payments will happen, since payment processors charge different transaction fees for in-person and online payments. Some payment processors offer competitive transaction fees for in-person payments but relatively high transaction fees for online payments, and vice versa. 

Pricing structure

The most cost-effective model for your small business will depend on your average transaction value and volume. Take a look at the two common pricing structures:

• Fixed-rate pricing: You pay a fixed transaction fee for each payment. This model works well for small businesses with low transaction volume.

• Interchange-plus pricing: You pay the interchange rate plus a per-transaction cost. Interchange rates vary by credit card company, but they’re usually around 2%. Although this model can offer lower per-transaction fees than fixed-rate pricing, it usually requires an additional monthly fee and tends to suit businesses with high sales volumes. 

Supplementary services and integrations 

If you run an ecommerce business, you need an online payment gateway. Your simplest option is to choose a payment processor like Shopify Payments, since they include a payment gateway in their services. If your payment processor doesn’t offer an integrated payment gateway, be prepared to pay extra. 

If you run an in-person business, you need POS hardware. Payment processing companies rent and sell this equipment. If you already have a POS system, choose a payment processor that can connect to your existing hardware. Depending on your business type, you might consider hardware with industry-specific functionality, like inventory management or restaurant shift scheduling. 

7 popular payment processing companies for small businesses

Take a look at some of the most popular payment processing options for small businesses:

1. Shopify

Shopify’s payment gateway and payment processor is called Shopify Payments and is free to all Shopify merchants. The gateway accepts payments from all major credit cards and features 3D secure checkout, data encryption, 24/7 customer support, and PCI compliance to ensure the security of your customers’ data. It also integrates with Shop Pay, which boasts a conversion rate up to 50% higher than guest checkout.

Shopify Payments also offers POS hardware for your in-person store. Shopify’s POS system features inventory and customer management, and data and analytics reporting.

Features: 

• Free with Shopify subscription

• Full integration with Shopify platform

• Integrated payment gateway

• Processes international payments in your customer’s local currencies

2. Square

Square operates on a flat-rate pricing structure and offers a free plan without setup costs for ecommerce companies. The company’s $29/month version is designed for restaurants and appointment-based businesses. Square is a popular choice for in-person companies, and it offers a variety of POS hardware options for rent or purchase. Hardware costs range from $0 for a mobile card reader to $799 (or $39/month over two years) for a register. 

Features:

• Free mobile device card reader

• Sales and inventory analytics

• Retail and restaurant-specific software solutions

3. Stax

If your small business has a high sales volume, you might consider Stax, which charges interchange-plus payment processing fees and a monthly fee from $99 to $199, depending on sales volume. Stax’s interchange-plus transaction fees are lower than many fixed-rate transaction fees, but you’ll need to make enough sales to justify the monthly cost. The good news is that the payment processor doesn’t lock you into long-term contracts. 

Features:

• Interchange-plus pricing 

4. Stripe

With its flat-rate pricing structure, Stripe is great for small businesses looking for a simple payment processing system. Stripe is an especially good choice for ecommerce business owners who value customization, since it allows you to add branding to your checkout or adjust the checkout flow to pursue a higher ecommerce conversion rate. Stripe also offers POS hardware for bricks-and-mortar businesses.

Features:

• Sales analytics and inventory management extensions

• Accepts international payments in more than 135 currencies

• Integrated billing and invoicing

5. Payment Depot

Payment Depot operates with the interchange-plus model, but its pricing structure is adaptable to your business. It’s not a plug-and-play option: you’ll need to chat with the Payment Depot sales team to determine your rates. Onboarding also requires going through the underwriting process, since Payment Depot is a merchant account provider. That said, Payment Depot can be a good choice for small businesses with high sales volume, as its interchange-plus rates tend to be more affordable than fixed-rate pricing.

Features:

6. Helcim

Helcim runs on the interchange-plus fee model but, unlike similar credit card processing companies, doesn’t charge a monthly fee. Helcim’s transaction rates decrease as business volume increases, making it a good choice for businesses intending to scale. Helcim promises guidance throughout the merchant account set-up process and offers a $500 buyout if you’re locked in with another payment processor.

Features:

• Interchange-plus pricing 

7. Clover

Clover is a cloud-based POS system and payment processor offering small business payment processing through its parent company, Fiserv. 

Geared toward restaurants, retail, and service-based businesses, Clover offers industry-specific plans with features like inventory management and shift scheduling. Clover’s in-person transaction fees beat many competitors, but its online transaction processing fees tend to be higher. Clover charges flat-rate payment processing fees, plus monthly fees, and offers discount pricing on locked-in contracts.

Features:

• Industry-specific solutions

• Shift scheduling, CRM, and analytics

Payment processing tips for small businesses

Protect yourself from fraud

Popular payment processors are PCI compliant to meet high security standards. Additional steps to mitigate your fraud risk include keeping your POS system up to date and opting for a payment gateway with address verification services (AVS) to match payment information to billing addresses. You can also enable two-step authentication to ensure your company is the only entity with account access and regularly monitor your business accounts for suspicious activity. 

Offer multiple payment options

Every customer has a preferred payment method. Consider installing a payment gateway that allows buyers to pay online using methods beyond credit and debit cards. PayPal Express Checkout, for example, lets customers pay with PayPal, Venmo, and Apple or Google Wallets. If you run an in-store business, consider accepting credit card alternatives like cash and Venmo.

Leverage data 

Your new payment processor will provide a wealth of data on customers’ preferred payment methods, which you can use to invest in POS hardware with competitive fees for that method. You’ll also determine when your clients shop and how much they spend. 

All this payment data will help you hone your marketing strategies. For example, you could conduct A/B testing with pop-up ads during checkout and use customers’ ensuing order totals to decide between ads.