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.

Put us to work

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.

Put us to work

As a new entrepreneur, coming up with a revolutionary digital product idea is the hard part. You have done the work of discovering a solution to the problem that you want to solve and finding out if the marketplace has room for your product. You are now ready to pass the product on to a developer with one question in mind: how much will this cost?

No matter if you have a little money to spend or a lot, staying on budget is important. For software development agencies, it is equally as important for their clients to stay on budget. With so many unknowns at the beginning of a project, how do you know how much your product will cost and how do developers provide a complete estimate?

A tool Clear Function now implements into our proposal process, to present an estimated cost for development, is the RAQ. This stands for Range, Assumptions, and Questions. This is an easier and quicker approach that developers can use to guide the estimation process. It helps clients to think through exactly what they want and need, and presents a price range that allows for bumps along the way. After the RAQ is completed companies are able to present a more accurate proposal to the client. Let’s dive into why estimates are hard to give and how the RAQ tool can simplify the process.

Developers Hate Giving Estimates

It’s no secret that developers hate giving estimates for new projects. They are excited about the actual work they will get to do and to see the product finalized and on the market, but estimates are complicated. Clients expect estimates to be accurate and if you give an exact number at the beginning of a project, you will be held to that number.

Developers see the inner working of estimates. They realize that there is no way to know exactly what will be involved just from an initial idea. As you begin to work on a project and receive feedback from testers, your design and needed features will change. Your project could end up being less expensive or more expensive based on the wants and needs of real customers.

Preparing Estimations Can Be Costly

For both the client and the software development agency, time is money. Because most projects are billed hourly, developers always want to be billing the hours that they work. Most companies do not charge to prepare estimations, a good practice, but it can end up costing money if the client does not decide to go with the company for development.

Do developers take time off of money-making projects to prepare an estimate? This is a risky move since there is a good chance that a prospective client might reject the proposal or simply disappear when they discover the amount of time, money and effort that is involved. Using the RAQ estimation model can help get an initial estimation done quickly and efficiently – lessening the risk for both parties.

How to Use the RAQ Estimation Model

  1. Record all Assumptions

Clear Function’s process for new clients is to first lead them through an intro call where they broadly discuss their new idea. The next step is a longer discovery session. It is during these two phone calls where we record parts of the project, including features, the problem they are solving, and the solution they are offering. It is also where we make valuable assumptions about the project.

Assumptions for a project could include only wanting an iPhone app or a website. You are assuming the project will be managed by your team or an offshore team to save costs. Assumptions can be validated during your initial session with developers.

  1. Ask Questions for a Tighter Scope

Questions can be asked during two times of the estimation process. First at the beginning to qualify the project, and after you have recorded all of your assumptions.

Qualifying questions are used to identify when you want your product developed, how involved you want to be, what you want the success of your solution to look like, and even how you plan to proceed once your project has ended. Qualifying questions tend to be less unique and more straightforward that could apply to multiple projects.

Clarifying questions asked near the end of the estimation process are to solidify certain details that could raise or lower the cost. This could include asking if the product needs to integrate with any existing software or if any design or branding work has already been done. These questions tend to be more specific and should be adjusted for each product.

  1. Present a Price Range

Now that assumptions have been made and vital questions have been asked, it is time to talk about money. With the hard work already done, developers can fairly quickly present clients with a range of prices, both low and high. Instead of a solid 50 thousand, you might present a range of 25 to 75 thousand.

With a range, it leaves the developer and the client room to add certain features and requirements or take them away. You aren’t set at a certain price because you don’t know exactly what to expect until you begin the design. Clients will have better peace of mind knowing that the price for the development of their product will most likely fall within that range.

What to Do When Clients Say No

Spending time working on an estimation just for clients to say no can be frustrating. Thankfully, with the RAQ model, you are putting an ample amount of time and effort into price estimation without losing significant amounts of money.

If a client passes, use the estimation you prepared for them as a template for other similar products. It will guide you on assumptions and questions to ask and speed up the process even more.

What other services do you offer that should be included?

Before you present your final estimation to the client, think through the other services that your company offers. Do you offer business coaching or a maintenance plan? These services can bump up the cost but are valuable resources that clients may want and need.

As an established UI/UX design agency with well-established client relationships and a sterling industry reputation, you also understand that your continued success depends on delivering a streamlined, intuitive experience to end users whose expectations for user interfaces are higher than ever. So when you encounter a special design challenge, a complex product update, or even an opportunity to move into an unfamiliar new domain, it may be time to look for a partner who can provide more hard-core engineering and development support.

But how do you choose one? Experience is essential, of course, but you know that not all experience is equally valuable. You are looking for a firm with the right kind of experience, with long-tenured clients and an industry reputation of their own. You see yourself as more than just another vendor. You are in the trenches with your clients: their challenges are your challenges. You deserve partners who see you the same way.

As with any partnership with a software developer, you must evaluate their experience at a level deeper than just their total years in the business. And with UI/UX design challenges in particular, it is essential to find a partner with a proven track record of navigating complex projects with your end users in mind, not just for the final product but throughout the development process. This post will provide some guidelines for evaluating potential development partners specifically with UI/UX design projects in mind.

Software Developer Qualifications: Finding the Right Partner

Of course, raw experience and expertise are vital. They are the primary way to evaluate the baseline of “hard skills” you look for in any potential partner. There are two key measures of experience you should consider for every potential developer:

  • Years of Experience: This involves more than just the number of years they’ve been in business. How long have they been concepting, prototyping and developing in your preferred tech stack (e.g., Microsoft .NET, Java, mobile web, mobile app, etc.)? Are they a niche firm that excels in a few specialized domains, or do they cover a broader range, perhaps with a bit less depth? Depending on the scope of your project, either one may be what you need, though of course, you’ll want to be wary of kitchen-sink firms who can’t provide the depth your product demands.
  • Tenure of Key Clients: Just as important as the amount of experience, what do their clients say about their commitment to quality? Do they stay engaged with support and new projects after the initial project has been delivered? Do they seem to view client relationships as sustained partnerships rather than one-time transactions? A little digging can tell you a lot about whether you’re dealing with a potential partner or just another vendor.

So, experience should be the baseline. But if you want to do more than maintain your reputation–if you want to take your current clients’ experience to the next level and expand your foundations for future growth–these “soft skills” will help you sift through the qualified developers to find the right developer:

  • An organized, user-focused approach to product development. Especially if you are upgrading or replacing an existing product, you understand how critical it is to provide your clients with continuity and reliability throughout the design process. The right developer will be sensitive to the needs of your current clients’ end users and creative in their approach to phasing in new features with minimal disruption. It’s important to remember that technical expertise in UI/UX problems and effective project management are not the same thing. When user experience is at stake, you need someone with both.
  • Passion that matches your own. Even in the development world, not everyone geeks out over UI/UX design problems like we do. Find someone who approaches your design challenges with the same enthusiasm as you. Does their website appear well-designed? What about the websites of the clients have they served? Do they meet your standards for design quality?
  • A concern for relationships and reputation, not just dollars and cents. A firm worth partnering with will take the long view of your project, not just because of their passion for the work, but also because they understand that their success as a company depends on the experience of their clients and their users over the whole life cycle of the product.
  • A vision for your future, in addition to a command of your current challenges. Finding workable solutions to your most urgent problems is essential, but a truly excellent developer has the creativity and industry savvy to see opportunities for growth in your product or platform.

How an Experienced Product Development Team Helped a UI/UX Agency Build for the Future

We recently had the privilege of working with a world leader in UI/UX design for logistics, business intelligence, transportation management systems (TMS for short), and supply chain management. They provide a vital operational tool for clients all over the world, which demands reliability and continuity for users, with high stakes for disruption. Over time, this demand led to a fragmented legacy TMS codebase, with one generation of script layered over another. They needed to modernize, but they couldn’t risk disrupting operations for their clients and risking damage to those relationships. And they also needed to balance continuity for existing clients with the demand for a dynamic and powerful product for new and existing customers alike. They needed the right kind of developer support: not just the raw experience and expertise, but also proven project management skills, a passion for UI/UX design, a concern for their client relationships as well as their own, and a vision for their future.

In Clear Function, they found what they were looking for. Understanding the value of an effective product roadmap, CF phased the upgrade to be minimally disruptive to the firm’s current clients. And we partnered with a trusted design team to update the user interface without a total recode. We then took on the major coding upgrades in a systematic, collaborative way. The end result was a reskinned TMS that was mobile-friendly, worked well with modern browsers, and even had some new bells and whistles thrown in. And it was all rewritten in a uniform, upgraded JavaScript framework, laying the groundwork for smoother upgrades in the future. Most importantly, the client was able to provide this vastly improved user experience without the excessive delays and frustrations that would have put their customer relationships at risk.

If, like our clients, you thrive on delivering superior websites, digital products, and experiences people love; if you work side by side with your clients as their partners; if you are laying the groundwork for products and relationships to last years, even decades into the future, you need more than a contractor. You need a partner who shares your passion for creating excellent user experiences, who sees your reputation as an extension of their own, and who has the vision to help you see opportunities for growth you didn’t know were there. These “soft skills,” combined with decades of experience and a long list of happy clients, are what Clear Function offers to a UI/UX design agency looking to preserve and expand on its legacy. Your own legacy deserves nothing less.

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