Making time for success: The advantages of outsourcing online payments for SMEs

Payment processing comes with a degree of risk and can be time-consuming – so what are the advantages of outsourcing online payments.

According to research carried out by the American Express Global SME Pulse, SMEs in the United Kingdom, and globally, are confident about their future business performance and optimistic about the economy, with 50 per cent of UK SMEs anticipating revenue growth of at least 4 per cent over the next 12 months.

In today’s society, and in order to see continued success, processing online payments is a must for SMEs as it allows customers to pay online or set up a direct debit for regular, automated payments. Whether targeting consumers or other businesses, organisations of all sizes will need to deal with the transfer or collection of payments at some point. But should SMEs outsource or look to process payments directly? That is the question.

Outsourcing processes

There are lots of advantages to outsourcing this responsibility. Particularly when payment processing comes with a certain degree of risk and, as such, can be time consuming. For any business that wishes to process card payments of any kind for its customers, it will need to obtain a Merchant ID from its bank. This allows the business to be identified by the banks and credit card institutions in order to accept credit card payments.

This means taking on additional risk and administration to manage that risk. The lengthy approval process, which includes credit checks, can put a lot of strain on a small team. For direct debits, a Service User Number is required from the bank which can be particularly time consuming as a bond is required.

On some occasions, the bank will even decline a request from a small business. If a company decides to outsource the processing of its payments instead to a specialist payment services provider, the right supplier will be able to supply the MID and SUN, thus taking on the risk and minimising the amount handled internally.

Security breaches

A supplier that is able to handle the risk surrounding the authorisation of a merchant ID, will also be able to help manage other forms of risk for its clients. For example, the challenge of adhering to the Payment Card Industry Data Security Standard (PCI DSS).

As security breaches become increasingly common, it is critical for organisations of all sizes to prove and maintain PCI DSS compliance.

If it was discovered that an organisation involved in the processing, transmitting or storing of cardholder data had caused a card breach, the organisation in question could face severe fines for either not being compliant or not maintaining compliance.

However, becoming PCI DSS compliant takes time, money and ongoing resource, three things that are often in short supply for a smaller organisation. PCI DSS assessments for level 1 Payment Service Providers have to take place on site and it can take weeks or even months before compliance is determined, depending on what is in scope and the complexity of the cardholder data environment.

The threat of cyber-attacks shouldn’t be ignored and organisations should ensure their chosen suppliers meet high standards for cyber security through government-backed accreditations like Cyber Essentials.

Cost in time

Processing online payments directly can be time consuming for other reasons, particularly around ensuring the offering and interface is attractive to customers. Third parties can help businesses to offer their customers greater flexibility on collection dates and frequencies – and provide an automated re-presentment facility on any failed payments – helping to boost take-up and reduce arrears.

Outsourcing the process of payments can also result in a more user-friendly experience for both SMEs and their customers. Some suppliers can provide multiple payments channels across online, phone, mobile and text to ensure ease and reduce the number of missed payments. This service can come with the added security benefit of 3D Secure authentication on every transaction, which allows the customer to confirm the transaction with the use of a password, reducing the risk of successful chargebacks.

For direct debits, a third party can provide an online payments scheduler which makes set-up easier for customers, allowing them to set up mandates online or over the phone with the ability to automate administration tasks for the organisation including the submissions to Bacs and correspondence to customers through email.

In conclusion, if SMEs in the UK are to successfully navigate the challenges and succeed in a post-Brexit world, they will need as much time and as many resources as possible. Outsourcing certain tasks, including payment processing, can free up the team’s time and enable them to focus on other areas that are more likely to contribute to better customer service, client relations and lasting business growth.

It also ensures that you and your customers benefit from the latest technology and features without having to invest in your own IT resources and development.

Ross Macmillan is head of research and intelligence at allpay Limited.

Further reading on online payments

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

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