Accepting payments in 2025 isn’t as simple as stacking bills in a cash drawer. In the US, for example, cash is used for only 14% of transactions. Consumers now have more payment options than ever before—including mobile wallets, buy now, pay later, and cryptocurrency.
So, how can you ensure your customers’ payments reach your business bank account? You need a payment processor.
Ahead, learn how payment processing works, read about eight 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—for example, from a customer’s debit card account to a business’s merchant account.
Small businesses need payment processors to accept payments beyond cash and checks, including debit cards, credit cards, and digital wallets like Apple Pay, Shop Pay, and Google Pay. Ultimately, a payment processor is an intermediary between your customer and their bank or credit card company and your business.
Payment processing is an essential merchant service, meaning it’s one of the tools that allows businesses to accept noncash payments. Other critical merchant services include payment gateways and merchant accounts.
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 four days. The steps are:
1. Customer payment
The customer enters their payment information into a payment gateway—either a physical point-of-sale (POS) system or an online checkout page.
The payment gateway receives, authenticates, encrypts, and sends the customer’s payment data to the payment processor.
2. Authorization
Next, the payment processor forwards the payment info to the customer’s card-issuing bank. The bank verifies that the customer has the funds, then notifies the payment processor that the payment is authorized.
3. Settlement and transfer
Once authorized, the payment processor settles the transaction by transferring funds from the customer’s bank to your business’s merchant account. The merchant account then sends the funds into your standard business bank account, making them available for withdrawal.
Components of payment processing
To properly accept noncash payments, small businesses need to understand three key components of payment processing:
Payment gateway
Payment gateways receive customers’ payment details, and authenticate and encrypt them before sending them along to the payment processor. A great payment gateway accepts a range of payment methods, from credit and debit cards to digital wallets.
Many payment systems, like Shopify Payments, function as both payment gateways and payment processors. Payment gateways can include a few different customer interfaces, including POS systems, ecommerce checkout pages, and payment APIs.
You’ll want to choose a payment gateway with strong customer authentication to keep you and your customers safe from fraudulent transactions. Payment gateways like Shopify Payments include authentication tools like 3D Secure.
The encryption process ensures your customers’ payment information stays safe from hackers as it’s transferred to the payment processor.
Payment processor
The payment processor communicates with the customer’s bank and initiates the transfer of funds between the customer’s bank and your business’s merchant account.
Like payment gateways, payment processors help keep payment information safe. They adhere to PCI DSS (Payment Card Industry Data Security Standard), a set of rules from major credit card companies that help ensure customer data stays secure.
The right payment processor can also help you improve the customer experience. For example, a payment processor like Shopify Payments enables one-click checkout by storing your customers’ payment details.
Merchant account
Customers’ banks won’t transfer funds directly to your business’s bank account. Instead, they’ll transfer them to a merchant account. If you plan to accept credit and debit card payments, a merchant account is the necessary bridge between the card issuer and your business account. Funds are usually held in your merchant account for a few days before you can transfer them to your business’s main bank account.
You can either have a dedicated merchant account for just your business (which can involve a lengthy setup process) or an aggregate merchant account, which you share with other businesses. Payment service providers like Shopify Payments supply you with an aggregate merchant account in addition to a payment processor and payment gateway. This cuts down on the steps you need to take to set up your payment system.
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 customers’ 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 value and shipping speeds.
Although onboarding with a merchant account provider can be complicated, they can sometimes be less expensive than a PSP if your business has a high sales volume.
What to consider when choosing payment processing for small businesses
- Transaction fees
- Chargeback fees
- Foreign transaction fees
- Pricing structures and hidden costs
- Supplementary services and integrations
Consider fees, 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 automated clearing house (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.
Chargeback fees
You’ll also want to examine different payment processors’ chargeback fees. A chargeback is when a customer disputes a transaction, and payment service providers charge you to investigate it.
Unfortunately, chargebacks are a reality of doing business: More than 324 million annual chargebacks are expected by 2028, according to a 2025 report from Mastercard. Businesses name 45% of chargebacks as fraudulent. In chargeback fraud (sometimes called friendly fraud), customers seek refunds for products they’ve received by disputing the charges with their credit card companies.
Foreign transaction fees
If you have an international customer base, make sure to look for a payment processor that accepts your customers’ local currencies. You should also consider foreign transaction fees.
If you expect to convert a high quantity of payments from one currency to another, be sure to look for a payment processor with low rates.
Pricing structures and hidden costs
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:
1. Fixed-rate pricing: You pay a fixed transaction fee for each payment. This model works well for small businesses with low transaction volumes.
2. 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.
To know which is best for you, calculate your monthly sales volume and anticipated payment processing costs. Make sure you can cover the costs of subscriptions while still making a profit—and double-check that lower transaction fees with an added subscription actually save you money.
You’ll also want to consider contracts. Some payment processors lock you into contracts and charge you a termination fee for leaving. If you’re running an in-person business, you should also think about the cost of setting up your POS system. Some companies allow you to rent equipment rather than buy it upfront. Factor in the anticipated costs of upgrading your equipment when you decide whether to rent or buy.
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 it includes a payment gateway. 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. 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.
Ultimately, selecting a payment processor with an integrated payment gateway and POS system can save you money and time, streamlining the payment process for your small business and allowing you and your team to interface with a singular tech stack.
8 popular payment processing companies for small businesses
| Provider | Transaction fees | Pricing structure | Monthly fees | G2 ⭐️ rating | Best for |
| Shopify | 2.5% to 2.9% + 30¢ online; 2.4 to 2.6% + 10¢ in person | Fixed rate | Free for Shopify merchants | 4.4 | Ecommerce businesses |
| Square | 2.6% to 2.9% + 30¢ online; 2.6% + 15¢ in person | Fixed rate | $0 to $199 | 4.6 | Service businesses |
| Stax | Interchange rate + fixed cost upon request | Interchange plus | Starts at $99/month | 4.9 | High sales volume and order value |
| Stripe | 2.9% + 30¢ online; 2.7% + 5¢ in person | Fixed rate | None | 4.2 | Online merchants not on Shopify |
| Payment Depot | Interchange rate + 0.2% to 1.95% | Interchange plus | None | 4.5 | Larger small businesses |
| Helcim | 2.08% + 8¢ for $50 average transaction value and $20,000 monthly sales volume | Interchange plus | None | 4 | Businesses intending to scale |
| Clover | 2.5% to 2.6% + 10¢ | Fixed rate | None, except hardware rental | 3.8 | Restaurants |
| PayPal | 2.29% + 9¢ in person; 2.99% + 49¢ online | Fixed rate | None | 4.4 | Businesses looking for a trusted name |
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 it’s free to all Shopify merchants. The gateway accepts payments from all major payment methods (including stablecoins).
Shopify Payments 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, as well as data and analytics reporting.
Best for
Ecommerce businesses
Pricing
Shopify Payments is included in all Shopify subscriptions. Transaction fees vary depending on your Shopify plan.
- Basic: 2.9% + 30¢ online; 2.6% + 10¢ in person
- Grow: 2.7% + 30¢ online; 2.5% + 10¢ in person
- Advanced: 2.5% + 30¢ online; 2.4% + 10¢ in person
Features
- Fixed-rate pricing
- Free with Shopify subscription
- Full integration with Shopify platform
- Integrated payment gateway
- PCI DSS compliant to protect sensitive financial data
- Processes international payments in your customers’ local currencies
- 24/7 customer support
- G2 ⭐️ rating: 4.4
2. Square
Square operates on a flat-rate pricing structure and offers a free starter plan. In addition to its standard plan, Square sells plans catered toward retail, appointment, and restaurant businesses, which carry different monthly subscription costs and transaction fees. Note that Square doesn’t accept currencies outside of the country where you set up the account.
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 swipe reader (limited to one per Square account holder) to $799 (or $39 per month over two years) for a register.
Who it’s for
Service businesses
Pricing
Square has differently priced plans for restaurants, retail, and appointment businesses. These are the prices for Square’s regular plan:
- Free: $0/month; 2.9% + 30¢ online and 2.6% + 15¢ in person
- Plus: $29/month; 2.9% + 30¢ and 2.6% + 15¢, with more advanced features like inventory management and appointment booking tools
- Premium: $79/month; 2.6% + 30¢ and 2.6% + 15¢
Features
- Fixed-rate pricing
- No subscription fees
- POS systems
- Free invoicing
- Free mobile device card reader
- Sales and inventory analytics
- Retail and restaurant-specific software solutions
- G2 ⭐️ rating: 4.6
3. Stax
Stax runs on the interchange-plus payment model, which makes it a viable choice for businesses with a high sales volume. Note that Stax charges a monthly subscription fee in addition to transaction fees. The monthly fee depends on your sales volume.
Stax does not charge a percentage rate on top of interchange plus rates, although it does charge a fixed rate of 8¢ to 15¢, depending on the payment method. This means that Stax’s transaction fees could be lower than other interchange plus payment processors, depending on your average order value. Regardless, you’ll need to make enough sales to justify the monthly cost.
Stax does not advertise its markup on its website, and it also doesn’t show the prices of its POS equipment. The good news, however, is that the payment processor says it doesn’t lock you into long-term contracts.
Who it’s for
Businesses with a high sales volume and high average order value
Pricing
Stax charges the interchange rate plus 8¢ to 15¢, depending on payment method. Transaction fees don’t change across subscription tiers. Subscription costs depend on the amount you process annually:
- Up to $150,000 per year: $99/month, then interchange plus rate + 8¢ to 15¢
- $150,000 to $250,000: $139/month, then interchange plus rate + 8¢ to 15¢
- $250,000+: $199+/month, then interchange plus rate + 8¢ to 15¢
Features
- Interchange-plus pricing
- Subscription fees
- 24/7 customer support
- POS systems
- PCI compliance
- Accepts payments in U.S.and Canadian dollars
- G2 ⭐️ rating: 4.9
4. Stripe
Like other top payment processors, Stripe also functions as a payment gateway. It has a variety of API options, letting businesses customize their payment gateways to their sites. Stripe also offers POS hardware for brick-and-mortar businesses, although its POS systems are somewhat limited compared to those of other top payment service providers.
Stripe offers fixed-rate pricing in its standard plan. For businesses with large sales volumes, Stripe offers specialized payment structures, like interchange plus pricing, volume discounts, and favorable rates for specific countries.
Who it’s for
Online merchants not on Shopify
Pricing
Stripe charges 2.9% + 30¢ for online payments and 2.7% + 5¢ for in-person payments. Custom fee structures are available to merchants with high sales volumes or unique business structures.
Features
- Flat-rate pricing
- No subscription fees
- 24/7 customer support
- Sales analytics and inventory management extensions
- Accepts payments in more than 135 currencies
- Integrated billing and invoicing
- G2 ⭐️ rating: 4.2
5. Payment Depot
Payment Depot, owned by payment provider Stax, operates with the interchange-plus model. Unlike some other companies with this model (including parent company Stax), Payment Depot does not charge subscription fees.
Note that Payment Depot is not a plug-and-play option: you’ll need to chat with the Payment Depot sales team to determine your rates, which the company customizes for your business. You’ll pay anywhere from 0.2% to 1.95% on top of the interchange rate. You’ll also need to contact the sales team to learn the pricing for the company’s POS equipment.
Onboarding also requires going through the underwriting process, so you won’t be able to get up and running with Payment Depot right away.
Keep in mind, too, that Payment Depot only works for payments from US-based card networks, so you’ll need to use a different payment processor for international cards.
Who it’s for
Larger small businesses
Pricing
Payment Depot charges the interchange rate + 0.2% to 1.95%. You’ll need to contact the company’s sales team to learn your customized rates. Payment Depot does not charge subscription fees.
Features
- Interchange-plus pricing
- No monthly fees
- 24/7 customer support
- PCI compliance
- G2 ⭐️ rating: 4.5
6. Helcim
Helcim runs on the interchange-plus fee model, but, unlike some similar credit card processing companies, doesn’t charge a monthly fee. Helcim’s transaction rates decrease as sales volume and average transaction values increase, 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.
Who it’s for
Businesses intending to scale
Pricing
Helcim’s pricing varies depending on your sales volume and average transaction size. For an average transaction value of $50 and a monthly sales volume of $20,000, you can expect to pay an average of 2.08% + 8¢, which totals the interchange rate, card brand fee, and Helcim margin.
Features
- Interchange-plus pricing
- No subscription fees
- Volume discounts
- PCI compliance
- POS system
- Accepts payments in USand Canadian dollars
- G2 ⭐️ rating: 4
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, and it offers complex POS systems like a kiosk for customers to place food orders themselves.
Clover charges flat rate payment processing fees, plus monthly fees, and offers discount pricing on locked-in contracts.
Who it’s for
Restaurants
Pricing
Clover’s hardware rental fees depend on your business type and POS setup. You also have the option to buy hardware upfront. Transaction fees depend on your plan:
- Starter: $16/month for equipment for 36 months; 2.6% + 10¢ for in-person, card-present transactions, and 3.5% + 10¢ for card information typed in
- Standard: $180/month for equipment for 36 months; 2.5% + 10¢ for in-person, card-present transactions, and 3.5% + 10¢ for card information typed in
- Advanced: $250/month for equipment for 36 months; 2.5% + 10¢ for in-person, card-present transactions, and 3.5% + 10¢ for card information typed in
Features
- Fixed-rate pricing
- Subscription fees
- Industry-specific solutions
- Shift scheduling, CRM, and analytics
- POS systems
- Accepts international currencies in some cases
- G2 ⭐️ rating: 3.8
8. PayPal
PayPal is best known as a consumer-to-consumer payment service that lets users send money to one another, but the company also has a payment processor product. It has higher online transaction fees than competitors, but it meets high security standards and offers customers a trusted name. PayPal also sells card readers and terminals for in-person businesses and has competitive rates for in-person transactions.
Who it’s for
Businesses looking for a trusted name
Pricing
PayPal fees for card-present transactions are set at 2.29% + 9¢. Online debit and credit card payments cost 2.99% + a fixed fee that varies depending on your country. In the United States, that fee is 49¢.
Features
- Fixed-rate pricing
- POS systems
- Advanced security features
- Supports 25 currencies
- G2 ⭐️ rating: 4.4
Payment processing tips for small businesses
Protect yourself from fraud
Popular payment processors are PCI compliant, so they meet high security standards. You can also take steps yourself to mitigate fraud risk and ensure a secure checkout.
These steps 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. You can further ensure payment security by choosing a provider with 3D Secure, such as Shopify Payments.
Offer multiple payment options
Every customer has a preferred payment method. Consider installing a payment gateway that allows buyers to pay online using payment options beyond credit and debit cards. Shopify Payments, for example, lets customers pay with PayPal, Venmo, and Apple or Google Wallets, in addition to traditional payment methods.
Leverage data
A processor like Shopify Payments 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.
Additionally, you can conduct your own testing during the checkout process, then use the data to 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.
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Payment processing for small businesses FAQ
What is the best way to process payments for a small business?
The best way to process payment for a small business is with a payment processor like Shopify Payments. Shopify Payments accepts all major payment methods, like credit cards and digital wallets like Apple Pay, has low transaction fees, and offers point-of-sale systems that seamlessly integrate with your ecommerce website.
What is the best payment system for a small business?
Shopify Payments, Square, and Stripe are among the best payment gateways for small businesses. Other popular options include Helcim, Clover, and Payment Depot.
How much does payment processing cost for a small business?
Payment processing fees for a small business typically cost between 1.5% and 3.5%, with an added charge as a fixed percentage or dollar amount. For example, Shopify Payments charges 2.5% to 2.9% plus 30¢ for online payments. Some payment processors also charge monthly subscription fees.
How can small businesses take payments online?
Small businesses can take payments online using a payment processor like Shopify Payments to accept debit cards, credit cards, ACH transfers, and other online payment methods, like Apple Pay and PayPal. Different payment processors offer different transaction fees and pricing structures.
