Get to know modern payment processing and the key components that affect how you do business. 

Payment processing hasn’t changed much since the world upgraded from bartering to currency. You want to sell something and your customers want to buy it – transaction complete. 

But what makes payment processing different today is the ability to do it well at scale, which includes technology, compliance, information security, accounting, tax, shipping, global reach, and other key elements that are integral to selling digitally. 

  • Good news for buyers: getting your next t-shirt online is much faster, greener, and more convenient. 
  • Good news for sellers: facilitating the transaction is trickier than with cash, but infinitely scalable with the right payment system in place. 

Payment Processing in the Internet Age

The marketplace has become increasingly comfortable with digital payments as security, regulations, and compliance have caught up with the internet wave. Today, you could even say we’re dependent on it. As a result, you can now choose between building a custom payments platform or a slew of ready-out-of-the-box payment processing solutions with varying capabilities.  

Both have their perks and downsides, but the most important consideration is functionality and your return on your investment. Whether you’re new to the subject or a seasoned veteran, it’s well worth the time to look before you leap on a solution to ensure it meets your business goals five or ten years from now. 

To lend a hand in this evaluation process, we’ll be diving into these topics the next few months:

Payment Processing Overview blog image

Payments in a Global Economy

Globalization enables businesses to operate across vast distances, nations, cultures, and currencies. According to the Federal Reserve Bank of San Francisco, online or remote purchases doubled in the last 6 years. Even physical money has become rare as people favor debit/credit cards and online payment platforms like Venmo, PayPal, or Zelle – or now even your smartphone. 

As a merchant, you may sell three products to someone in Maine today, seven to a buyer in Portugal tomorrow, and 15 in your Minneapolis brick-and-mortar store this week. Ultimately, this means that any tech-enabled organization needs tech-empowered payment solutions to make the purchasing experience as quick and convenient as your customers expect.

Let’s explore.

Key Features in Modern Payment Processing Systems

1. Basic Payment Flow

When a customer comes to your physical store or online store, they do their shopping and we hope they initiate payment. It tends to look a something like this:

Online Payment Process blog image

You are the merchant, they are the customer, and if they’re using a digital payment method, a payment gateway is a key part of the process.

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2. Payment Gateways: Gathering the Details

In short, payment gateways request certain information about a transaction and a customer to help confirm the validity of the card or direct payment. For example:

  • Brick-and-mortar stores generally use POS (Point-of-Sale) systems to collect payment information, such as credit and debit card numbers. In this case, the information you need about the customer is stored on the card, plus some sort of security like a PIN. 
  • Online merchants use payment gateways to collect the necessary customer information to make a payment. This info is key for facilitating transactions, but it’s just the start.

The latter group of merchants may include eCommerce, eBusinesses, online retailers, “bricks and clicks,” and more. Your customer makes their selection and upon checkout must fill out a form gathering payment details such as name, address, shipping information, coupon codes, card information, and more – depending on the scenario. 

Online payment process - payment gateways

Payment gateways like these typically work with a variety of card-issuing banks and card associations

  • Card-issuing bank: financial institution that offers branded payment cards from card associations directly to consumers. This may include credit cards, debit cards, key fobs, and prepaid cards.
  • Card association: a network of issuing banks and acquiring banks that process branded payment cards. For example: Discover, MasterCard, Visa, etc.

Besides ensuring that the payment details are securely transferred, the gateway can also check the customer’s credit card number and billing address to make sure that they match. Otherwise, the transaction may get flagged for potentially being fraudulent. If everything checks out, the information passes to a payment processor.

Note: Some services like PayPal and Stripe provide combined payment gateway and payment processing services. For simplicity, we’ll treat them as separate. Let’s dive into payment processors next. 

3. Payment Processor: Processing the Transaction

Payment gateways work with payment processors to make the transaction process fast and simple. A payment processor connects customers and their card-issuing bank with merchants and their acquiring bank to facilitate transactions.

Once the payment processor receives payment information, they contact your customer’s credit/debit card issuer, often their bank, or other relevant financial institution (say, PayPal). With credit and debit card transactions, like Visa or Mastercard, a card network facilitates communication and transfers.

The customer’s card issuer or other relevant financial institution (sometimes called the merchant acquiring bank) will then check to make sure that the customer has the necessary funds or credit to cover the transaction. If the financial institution notices any red flags, say suspicious purchases, they might pause the transaction and contact the cardholder/client. Otherwise, if the funds are available, they will approve the transaction.

Online payment process - payment processor blog image

From here, the payment processor will pass the info back to the payment gateway, which will update you (the merchant) and your customer.

4. How Funds Get Transferred from Customer to Merchants

The payment gateway will let you and your customer know whether the transaction was approved or declined. Assuming it was approved, your customer’s bank or other relevant financial institution will send money to your (the merchant’s) acquiring bank, which is the financial institution you use to accept payments.

The acquiring bank will deposit the money either into a merchant account specific to your business’ merchant ID (MID), or an aggregated merchant account. Your money stays in this account in case of chargebacks, returns, and/or other issues later on. After the appropriate time frame, it’ll be deposited into your designated business accounts.

Online payment process - payment settlement blog image

5. Fast and Secure Transactions

Don’t worry if this is still a bit confusing. Fact is, modern payment systems are intricate and have many stakeholders. But what you get is the ability to process payments worldwide within a matter of seconds. This way, customers can get the products and services they need, and businesses can reel in the revenues needed to thrive.

Yet when it comes to money, speed isn’t everything. In fact, payment systems sacrifice a fair amount of speed in exchange for security. This is a trade we gladly make to preserve relationships with customers who expect us to handle their sensitive information with respect and care. Fortunately, modern payment systems are typically quite safe.

6. How Are Transactions Secured?

Where there is money, there will be fraudsters trying to get away with the loot. The internet is massive and data constantly bounces around on different pieces of hardware via highways of digital infrastructure. Often, criminals will try to hijack the data while it’s being transmitted. 

Fortunately, there are many steps merchants, cardholders, banks, and other entities can take to reduce the risk of criminal activities.

We’ll dive into this topic in more detail soon if you need to know more about acronyms like TLS, SSL, SIEM, PCI DSS, GLBA, GDPR, FISMA, and more. But for now, it’s worth noting that when shopping for a payment system solution or team of developers to help modify what you have, security is an essential component.

The Wrap Up

We covered a lot here, but we just skimmed the surface. We love this topic because it’s our specialty and it’s important. 

Modern payment systems simplify purchases for customers in a world where money is invisible and everything rides on how you handle the data. You may find yourself in a situation where you’re choosing between a custom payment system or an out-of-the-box payment system, depending on your business needs and goals. 

It’s worth a hard look, because as business models change and relationships with customers evolve alongside the internet, out-of-the-box payment solutions often fall short of meeting many companies’ need for more flexible, custom payment platforms.

Whichever you choose, Clear Function is always here to lend a hand. Book a call with us at a time that works for you and we’d be happy to help.

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Starting your small business and launching your digital product is a huge accomplishment, but the launch buzz will only take you so far. Pretty soon you are going to need to develop an in-depth marketing strategy and stick to it.  A strong marketing strategy will connect you with the right customers, get people talking about your business, and set you up for financial success. 

When you think of marketing what comes to mind? Is it the traditional way of doing things like commercials, billboards, and mailers? Or is it the new way of doing things that involve social media, digital ads, and targeted website landing pages? 

At Clear Function we are digital experts. We stay up to date on current marketing trends so that our clients stand out above the competition. You can also stand out by avoiding these easy marketing mistakes.

Digital Marketing Mistakes To Avoid 

  1. Not Having a Clear Conversion Point On Your Website

The number one goal of your website is to see customers convert. This could be filling out a contact form if you are selling a service or actually buying a product if you sell something tangible. If a customer can’t easily find a button or form where they can take action they will leave your site. 

Experiment with buttons like “Buy Now,” “Shop Now,” or “Get Started.” See which works best for your business and then include that button on multiple pages. 

  1. Not Retargeting Potential Customers

What is retargeting? Using paid advertising to send ads to people who have visited your website but not converted. People who have visited your website are the most likely to make a purchase because they already have an understanding of who you are as a business. 

The first question to ask is why did they not convert? Did your website not have a clear conversion point or do they need a message targeted specifically to them? These are issues you can fix with a targeted ad. Through Google Ads, you can target only customers who have visited your website and increase your chances of converting! 

  1. Not Reengaging Old Customers

Customers who have bought from you and had a good experience are your best target market. When you add new products or service offerings they are more likely to purchase them because they already trust you as a business. Add all previous customers to an email mailing list and continue to build and maintain the relationship you have with them through frequent email communications and sales offerings. 

You can also reach out to them for testimonials to use in marketing material. Reading customer reviews is an easy way for new customers to convert. 

  1. Not Using Social Media Correctly

Social media is a powerful marketing tool, but if you don’t use it correctly you can end up losing money. Advertising is available on almost every large social media platform. If you take one piece of information from this article it should be this: don’t just use the boost button!

Create detailed, strategic social media ad campaigns. Spend time targeting your specific customer group, creating compelling images, and writing copy that helps customers convert. Boosting specific posts will only get you so far, but the other marketing tools available through social media are easy to learn and have the potential to bring many new customers. 

Of course, if tackling social media and ads seems like a daunting task, we recommend hiring an external marketing team. The Clear Function team has years of experience doing just that, and more! Contact us today to learn how we can help you grow. 

  1. Not Understanding What’s Happening On Your Website

Did you create your website years ago and haven’t edited it since? Your website is never really done! You can always make changes based on feedback and analytics on how customers interact with your content. 

Google Analytics is free so you have no reason not to use it! Learning where customers are clicking and how long they are staying on specific pages can help you understand why they aren’t converting. Don’t be afraid to change copy and images, update the style, and get rid of old information. 

  1. Not Leveraging Google My Business 

Another free resource businesses should take advantage of is Google My Business. When a customer searches for your business name or description, your Google listing is the first thing they see. Keeping your business hours updated, including photos or your logo, allowing people to post reviews, and running promotions is a simple but effective marketing tool. Without a Google My Business page, you will be losing to your competitors!

Evaluate Your Current Marketing Strategy or Create One Today! 

Are you making any of these mistakes in your day-to-day business marketing? These are all easy mistakes to fix by you or your trusted marketing team! Remember that digital marketing is a fast-moving and ever-changing field. If you try something new and don’t see results, change your path! 

Are you using social media to its maximum potential to grow your startup?

It’s no secret that social media has changed the world. Even more, it’s completely changed how businesses market themselves. What once was dominated by print advertisements, email campaigns, and phone calls now has a worthy competitor in social media marketing. When done well, a strategic and smart social media presence has the potential to grow your sales, customers, and reach in substantial ways.

To best utilize all of the components social media has to offer, you need to learn how to effectively manage your accounts and make sure you are marketing to the right group of people.

Start With a Clear Plan

Before you jump in and start crafting posts and creating content, you need a solid plan of action. Take a step back and determine who you are trying to reach and what platforms they are currently on. While your biggest group of potential customers may be on Instagram, you could also have a substantial group on Facebook that is being ignored. Without a clear plan, you could be spending time and money targeting customers on platforms they aren’t prominently using.

When you are done researching your customers and platforms, you are ready to create a content calendar that you can update regularly with post ideas, dates of scheduled posts, and copy. A calendar allows you to line up all of your future posts and see how your upcoming content relates to one another. Staying consistent in your voice is what will help you create long-lasting relationships with your customers.

Include All Four Winning Components in Every Post

As you create your social media posts, it’s important to include these four components. They will ensure that customers take action and engage with your brand.

  1. Start With a Hook

If you don’t gain the attention of the reader right away, they are more likely to keep on scrolling. A hook pulls the reader in and makes them want to engage with you and your product. This could be a question, a statement that sparks emotion, or an interesting fact. It can be helpful to see the hook as a way to empathize with the reader about a problem they may be experiencing.

  1. Resolve Your Hook

Once you grab their attention, it’s time to resolve the question the hook asked or the emotion it created. This is where you can mention your product or service and position it as a solution to a problem. Save the bulk of your copy for this section of the post.

  1. End With a Call to Action

The reader won’t make a purchase or visit your website without a call to action prompting them to take the next step. First, determine what that action step should be, and then phrase it in a way that the reader can engage with.

Example: Contact us! – linking to a contact form on your website, Shop Now – linking to your sales page, or Learn More – linking to a landing page on your website.

  1. Add a Photo or Graphic

Photos and graphics grab a reader’s attention and make them stop on the post. You don’t need a photographer to post quality photos, just invest the time in making sure that the photos aren’t blurry and that they always include a subject. For graphics, Canva is your best friend! You can easily create posts that look sharp and creative.

Invest in a Scheduler

Social media schedulers are your friends! Instead of planning out and posting individual posts each day, you can schedule for an entire month of posts with programs like Later or Hootsuite. These programs are subscription-based and are often affordable. You can schedule posts, create ads, see analytics, and manage content. As a new entrepreneur, this is an easy way to free up your time and increase your social presence.

Social Media Management Do’s and Don’ts

While social media is an easy tool to learn, it does come with its own list of dos and don’ts. Following these guidelines can help you more efficiently manage your accounts and connect with potential customers.

Do post positive reviews and highlight customers’ successful journey with your product or service. You made a product that you should be proud of, don’t be afraid to share that with the world!
Don’t make promises you can’t keep. Nothing burns the trust of your customers more than when you promise huge results or free products when you can’t guarantee these.

Do be authentic in what you post. Be truthful and honest and real – this is what will connect you to your customers!
Don’t be fake. Never lie or put on a show to your social media followers to portray your business as something that it isn’t.

Do post consistently. If you tend to post Monday and Friday, make it a priority to continue posting on those days. Consistency will help your customers know when to expect to hear from you.
Don’t post sporadically. The social media algorithm only benefits users who consistently post – take advantage of it and don’t be sporadic with your posts.

Do maximize social media’s potential. Advertising, analytics and so much more. Make sure you are utilizing all the potential social media has to offer!
Don’t expect it to be a cure-all for your business. Social media isn’t a one-stop-shop for success. You still need to employ other basic marketing tactics to see success.

When Should You Hire Outside Help?

Now that you know what you should include in each post and the important dos and don’ts, it can be helpful to recognize the signs of needing to hire outside help. Hiring a social media manager or outsourcing social media to an agency can take the burden off your plate and free up time for you to focus on your business. If you find that you can’t keep up with your audience, or the effort far outweighs the return then outsourcing is a smart decision! 

Research potential managers online and ask for a portfolio to view previous campaigns they have run. Look for measurable results before you hire anyone. Whether you decide to outsource or manage your own social media, striving for measurable results that drive profit is your number one goal and can be easily met through a strong plan! 

You have a revolutionary idea for an app, but when it comes to figuring out how much it will cost, you are lost. Without guidance on how to get funding, your app might never see the light of day. This is where the Clear Function team can help! We’ve taken our clients through the process of funding their app because we see the value in digital products and know the resources that are available for new entrepreneurs.

If you’ve done even ancillary research around your funding options, you are probably overwhelmed and confused. From self-funded to venture capital and everything in-between there is a lot to consider when figuring out what your best option is for getting your app and start-up off the ground.

Throughout today’s article, we will answer several of the most asked questions around funding your app. When you’re done reading, you will have a better understanding of what you need and how to get started. It may seem like a hard process, but with expert help, it can be smooth sailing!

Keeping Your App Development Costs in Check

It’s important to realize that the cost of your app could vary wildly. It depends on the complexity of the application, the reach, and how much you decide you want to spend. If you are looking to create an app on a smaller budget, we recommend a few steps.

  • Create an MVP: MVP stands for Minimum Viable Product and is essentially your app in its most basic form. It is the first version you release with only a few features and a minimal design. MVPs are used to conduct user testing and are a fundamental component to receive early feedback.
  • Find a cheaper developer: The actual code development of your app is where the money starts to add up. The Clear Function (CF) team is full of expert engineers, but we understand that not everyone can afford the cost of local development. We partner with an offshore agency to provide a high level of development to our clients while still providing a local CF project manager. With a local project manager, you can rest assured that you will always be up to date on the timeline and that your needs will always be advocated for.
  • Prioritize features: What features are a priority for version one of your app? When you try to build the first version with every single feature, it can get pricy. Spend time talking to your focus group and researching exactly what they want and need. Prioritize those features and only focus on the first few for version one.

We have launched MVPs from 5 thousand to 200 thousand dollars. If you are coming to an agency with an already validated idea and design, the cost will be much less than if you are coming at the very beginning. When you talk with an agency like Clear Function, they will give you a better estimate about how much your specific app could cost.

How Much Money Do I Need to Get Started and How Do I Raise Funds?

The first thing to do is to evaluate how much money you currently have to work with. If you have a good amount of money and feel confident that it is enough to create your MVP, then you are in a great place! This is what we call:

Scenario 1: Self-funded

Say you have a good job that has given you industry expertise in the area you want to create your app in, and you have been able to save capital to self-fund your app. You are able to meet with developers and begin the process of creating your MVP.

Once you have an MVP created, this is what you will then show to potential investors to create the next version. Version 2 will include extra features and a more complex design. Having an MVP to show investors will make you look more credible and will show that you have a solid audience who is excited about future releases.

We always recommend keeping in mind that as soon as you release your app to the public, you will need to make changes. This comes naturally as you receive feedback or you have an error in the code. It’s essential to have enough money to fix those errors or make improvements.

Scenario 2: Friends and Family

The second scenario involves having a good idea but not having the existing capital to do it on your own. You have pitched the idea to your friends and family, and they agree that it is a good idea. They have helped you out with the initial investment but will want to see completed designs and market testing before they commit to more money.

This is also where crowdfunding can come into place. Several websites exist to help with this, like AngelList or Fundable. Don’t feel like you have to rely on your family and friends throughout the entire development of the app. After you have the MVP, you can take it to outside investors with this scenario as well.

Scenario 3: Bank Loan

The third way to get funding is through a small business loan. Typically banks require a very robust business plan, so before you meet with an underwriter, you will want to do a lot of work on the front end. The 7a program is used for startup loans and will require a personal guarantee if you can’t pay the loan back.

Creating an app is a risky move, just like any other startup business. We don’t recommend taking out a loan as your first option, especially if you risk losing your house or another piece of collateral. If you do decide to consider a loan, make sure you have all the necessary paperwork and information together. It can beneficial to work with a business coach at this step who can take you through the process.

How Do I Get Started?

You will need several things nailed down before you actually start the development of your app. Do you have a financial model? Have you done market research? Have you thought about what your brand identity will be? These are all questions, along with many others, that will need to be answered, and the process can be much easier with a business coach.

A coach will help you see beyond just the lines of code. They will prioritize what you need to work on and make sure you will be able to recoup your investment early on. While this is an added expense, it is completely worth it because you’ll actually end up saving money in the long run with a more strategic business plan.

Are you ready to talk about your app idea and get started funding it? Schedule a Discovery Session with our team and start the exciting process today!

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