What are payment processing solutions, and why do you need one?

Say you’re in your favourite little café. The coffee’s amazing, the vibes are immaculate… but when it’s time to pay, the credit card machine freezes. Twice. The owner gives you a sheepish look and says, “Ugh, it does this all the time.” Next thing you know, they’re writing your name on a napkin and saying, “Just pay next time.” Sound familiar?

Now, maybe that one latte isn’t a big deal. But, what if that’s happening ten times a day? Across multiple locations? Or on your online store where customers bounce the second something doesn’t work?

If payments are clunky, slow, or unreliable, customers notice. They lose trust, and businesses lose money. A lot of it. In fact, payment failures cost businesses globally around $20.3 billion every year.

That’s why we’re talking about payment processing solutions today. From what they are to why every business, no matter the size, needs to get this right. Because there really is a simple way to ensure you're not losing any cash flow —and it all starts with having the right system behind the scenes. One that keeps things running, even when you’re busy serving matcha lattes or packing up online orders.

What is a payment processing solution?

You’ve probably used one today without even thinking about it.

If you’ve ever paid by credit card, tapped your phone or card machine using contactless payment methods, or bought something online using digital payment options, a payment processing solution was quietly working in the background.

For businesses, choosing the right payment processing strategies isn’t just about looking slick at the point of sale (POS). It's about boosting customer satisfaction, avoiding lost sales, staying on top of your cash flow, and keeping those awkward “sorry, our system’s down” moments to a minimum.

Let’s break it down even further.

Definition in simple terms

A payment processing solution is the tech that lets you process payments - from credit and debit card transactions, to bank transfers and other electronic payment processing solutions.

It checks if the payment is real, confirms there’s enough money, approves the transaction, and makes sure it lands in your account, quickly and securely.

Think of it as the middleman who handles all the boring, behind-the-scenes stuff so you can just focus on running your business. No delays. No drama. Just smooth, simple payments.

Core components of payment processing

So, how does a payment actually go from your customer’s card to your merchant’s bank account? There are three main players making it all happen.

Payment gateway

The payment gateway captures the payment information when a customer pays—whether that’s online, in-store, or through a mobile app. It collects the transaction data, encrypts the sensitive payment details, and sends everything securely to the payment processor. Think of it like a secure messenger, passing along the customer's credit card or debit card info without exposing it. If you're using credit card payment processing software or running an eCommerce site, the gateway is what makes online payments possible in real time. No gateway means no payment.

Payment processor

Once the payment gateway has sent the transaction details, the payment processor takes over. This is the engine of the operation. The processor communicates with the issuing bank (which just means your customer’s bank) and the acquiring bank (your merchant bank) to get the payment approved. It checks for fraud, confirms there’s enough money in the account, and either gives the green light or declines the transaction. All of this happens in seconds. A reliable electronic payment processing solution will make this step feel invisible.

Merchant account

This is where the money actually goes. A merchant account is a special type of bank account where funds from credit and debit card payments land before they’re moved into your regular business account. It's essentially a holding space that helps manage transaction fees, interchange fees, and settlements from different financial institutions. Once the payment’s cleared, the money’s transferred to your merchant’s bank account, usually within a day or two, depending on your provider.

How payment processing works (Step-by-Step)

Let’s walk through how payment processing works,from start to finish:

From payment entry to settlement

1. Customer pays: It all starts the moment the customer taps their card or clicks "Pay Now" on your online store. Whether they’re swiping a credit card, using their phone, or entering payment details online, they’re kicking off the whole process.

2. Payment gateway takes over: Once the payment information’s entered, it goes through the payment gateway. This is like the bouncer at a club, making sure everything’s legit. It encrypts the transaction data, so the customer's info stays safe as it heads to the next step.

3. Processor sends request: The payment processor forwards the request to the issuing bank (the customer’s bank) via the relevant financial institutions and card networks.

4. Approval or decline: The issuing bank checks the customer’s account, makes sure they have enough funds, and sends back a decision: approved or declined. If the bank gives the green light, the transaction goes through. If not, the customer’s going to hear that dreaded decline.

5. Merchant gets confirmation: Now, the good news! Once approved, the merchant gets the green light, and they can complete the sale. The money moves into the merchant account, minus a few payment processing fees, of course.

6. Funds settle: Finally, the money moves from the merchant account to the merchant’s bank account.

Online vs. in-store transactions

Now, when it comes to in-store payments vs online transactions, the process is pretty much the same—but there are a couple of key differences.

In-store payments are pretty quick. The customer taps, swipes, or inserts their credit card at the point of sale (POS), and the system takes care of the rest. It’s fast, it’s easy, and it’s in real-time.

For online payments, the same things happen, but there's a little more tech involved. The payment gateway plays a bigger role, and there’s extra security in place to protect the payment info and verify the customer’s identity.

Regardless of how your customers are paying, the end goal is the same: getting that transaction through securely and quickly.

Fraud prevention and security protocols

We've mentioned before that all of the transaction process is happening within seconds of your customer popping in their card details or tapping their phones. But what you may not know is that, in the background, there’s some seriously advanced tech at work to keep your transactions safe.

Fraud prevention is a massive priority in the payment processing industry. Every time someone enters their payment information, it’s at risk of being intercepted or misused. So here’s how we protect sensitive payment data:

• Encryption: This scrambles the payment details so no one can read or steal them.

• Tokenisation: Instead of storing the actual credit card number, we replace it with a secure token.

• PCI compliance: This is a set of security standards that businesses must follow to make sure customer payment information is handled properly.

• Fraud detection: Advanced tools track transactions in real-time, watching for suspicious activity. If anything looks off, it’s flagged right away.

Why businesses need a payment processing solution

Why do businesses really need one, you ask? It's quite simple. Not that many businesses can trade cash-only, so without a smooth, reliable, secure system in place, you're risking payment failures, unhappy customers, and, ultimately, lost revenue.

Ensuring reliability, speed, and security

No one likes waiting. Your customer doesn't want to be at the counter on their lunch break, card in hand, tapping away at a POS system because it's taking forever. Or worse, failing halfway through.

If you don’t have a good payment processing system, it can be frustrating for both your staff and your customers. It’s a classic example of when things go wrong, and customers start doubting your business.

A good payment processing solution helps to ensure everything happens quickly. Your customers tap their cards or click, pay, and it's done. No delays. No freezes. And, most importantly, it’s secure.

Supporting multiple payment methods

Credit card? Debit card? Mobile wallets? Maybe even bank transfers or contactless payment methods? The more options you offer, the better.

To get a better idea of which of these you absolutely need to be offering, here's some data about electronic transactions and credit card transactions for you:

• Credit cards dominate both online and POS transactions, making up 58.1% of total card payment value last year.

• That same research found that debit cards contribute 41.9% of total card payment value and are increasingly used for contactless transactions, especially for small purchases.

• Digital wallets are rapidly growing in popularity. Online they currently represent 37% of ecommerce transaction value, projected to reach 52% by 2027. They also account for 15% of transactions.

• BNPL services hold a smaller share but are growing, with over 55 million Millennials and Gen Z consumers using these services in 2024.

As you can see the payment landscape is really evolving over time meaning you need to be ready to accept a range of payment methods at your business.

Managing recurring billing and subscriptions

Think of all those services you pay for monthly. Your Netflix. Your gym memberships. Any SaaS tools your company uses. Customers love the convenience of automated recurring billing.

A payment processing solution makes managing those monthly payments easy and ensures that customers are billed accurately, on time, every time. You won’t have to chase down payments or deal with failed subscriptions, which means happier customers and steady cash flow.

Now, you may think that your business doesn't need this, or that it doesn't apply. But you'll be surprised at how innovative companies are introducing subscription services credit card processing. Here's a few ideas:

• If you run a hair salon, you can introduce an 'unlimited blowdry subscription' where customers pay a certain amount each month for endless blowouts. After all, who doesn’t want to rock that perfect hair every day without worrying about the cost every time they step into the salon?

• If you sell organic goods, how about a monthly wellness box where customers get a curated selection of wellness goodies (think organic teas, protein bars, essential oils) delivered right to their door each month?

• Say you own a small clothing boutique, imagine a 'personal shopper' subscription where your customers get exclusive access to limited-edition items or custom-style boxes every month.

Subscriptions aren’t just for Disney+ or Amazon anymore. It’s an opportunity to create consistent revenue streams. 

Multi-currency and global transactions

If your business is growing or you’re already serving international customers, you need to think global.

A good payment processing solution can handle payments in multiple currencies. Whether you’re dealing with payment details in euros, pounds, dollars, or yen, your processing solution automatically adjusts everything for you, so your global transactions are as easy as local ones.

Who needs payment processing solutions?

If you’re thinking, Do I really need a payment processing solution? - the answer is: yes, yes you do. No matter the size or type of your business, if you’re handling transactions, you're going to need a way to process payments. Let’s look into it by industry:

eCommerce businesses

If you're selling anything online, payment processing is a must. Whether it’s a one-time purchase or recurring subscriptions, your customers want a quick, seamless way to check out.

Brick-and-mortar retailers

A reliable point-of-sale (POS) system that accepts multiple payment methods is what you need for this type of business. Trust us, there's nothing worse than a frozen card reader while a line is building up.

Service-based businesses

These are your gyms, your salons, your spas. Anywhere you're offering a service, not a product. Payments can get a little finnicky here. You've got single sessions, monthly fees from memberships, regular subscriptions. You need a system that handles it all.

SaaS and subscription companies

For SaaS and subscription companies, monthly billing is a whole other ballgame. Customers sign up once, then expect to be billed automatically each month (or year) for using your service. The right payment solution automates everything though, from subscription management to billing and renewals.

B2B and high-risk Industries

In high-risk industries like gaming, having the right merchant account and fraud protection helps to avoid chargebacks and ensure everything is processed securely.

Key features to look for in a payment processing solution

When you're choosing a payment processing solution, you want to make sure it’s got all the right features. Here’s what to keep an eye out for:

Security and compliance (PCI-DSS)

You’re dealing with sensitive payment information, so make sure your solution is PCI-DSS compliant. If you're not, you could end up paying $5,000 to $100,000 per month until you're compliant.

POS and online store integration

The last thing you want is a system that doesn’t sync properly or causes problems at checkout. Smooth integration from your card payment solution with your POS system means fewer errors and a better customer experience.

Mobile payment capabilities

Your customers expect the convenience of paying on the go. So, make sure your payment processor supports mobile payment methods like Apple Pay, Google Pay, and good ol’ contactless payments.

Support for recurring billing

Automating payments will save you time and reduce late payments, keeping your cash flow steady.

Transparent pricing and fee structures

No one likes hidden fees. Look for a payment processor that offers clear, transparent pricing.

Common types of payment processing setups

Not all payment processing setups are built the same. Depending on your business, you might need something simple, or you might need the full bells-and-whistles setup.

Direct payment processors

These guys work directly with your business and the financial institutions behind the scenes. You get your own merchant account, and the payment processor handles the whole transaction process. It’s a little more setup upfront, but it gives you more control, better rates, and stronger support. They’re fab for established businesses that want a long-term, scalable solution.

Aggregators

Think of these as the grab-and-go version of payment processing. Services group your business with others under a single merchant account, which means faster setup. But the trade-off is slightly higher transaction fees, less customisation, and occasional account holds.

All-in-one merchant service providers

These are your do-it-all types - credit card payment processing software, POS systems, merchant accounts, payment gateways, and even hardware in some cases.

Payment gateway vs. payment processor

Here’s where people get tripped up. The payment gateway checks and encrypts the payment information, making sure everything’s safe and secure. The payment processor handles the actual movement of money between your customer’s issuing bank and your acquiring bank (aka your merchant’s bank account). You often need both, but with some providers, they’re bundled together. We’ve actually created an in-depth, payment gateway vs payment processor guide you can take a look at if you want to learn more on this. 

How to choose the right payment processing solution

With so many options out there, choosing the right payment processing solution can feel a bit… overwhelming. But it doesn’t have to be. Let’s walk through what really matters:

Factors to consider: size, industry, and volume

Start with the basics. Are you a solo entrepreneur? A busy café with a queue out the door? A fast-scaling eCommerce brand? Your business size, industry, and monthly transaction volume will help narrow things down fast.

• Low volume? Go for a flexible aggregator with pay-as-you-go pricing.

• High volume or growth plans? A dedicated merchant account might save you on transaction fees long-term.

• Niche industry or high-risk? You’ll need a provider that specialises in high-risk payment processing (some won’t touch certain industries) so look for card processing merchant services that do.

There’s no one-size-fits-all, so think: what does your day-to-day really look like?

Essential questions to ask providers

Don’t just hit “Sign Up” and hope for the best. Ask questions. Get clarity. Some of the big ones:

• What payment methods are supported?

• What’s the settlement time?

• Is it easy to integrate with my POS system, ecommerce platform, or accounting tools?

• How are disputes and chargebacks handled?

• What kind of customer support do they offer—and is it actually human?

This stuff matters, especially when something goes wrong (and it will, at some point).

Tips to avoid hidden fees

Here’s what to watch for:

• Monthly fees or “account maintenance” costs

• Interchange fees (these vary by card type and issuing bank)

• Extra charges for international payments, fraud protection, or PCI compliance

• Early termination fees (yep, they’re still a thing)

The trick is to read the fine print, and if it’s too fine to understand, that’s a red flag.

Future trends in payment processing

Payment processing isn’t standing still, far from it, in fact. The way we pay is changing fast, and the tech behind it is evolving even faster. Here are the trends in 2025 and beyond.

AI-driven fraud prevention

In 2025, AI-driven fraud prevention is the gold standard. These systems analyse patterns in transaction data in real-time, spotting anything suspicious before it becomes a problem.

Cryptocurrency and alternative payments

Cryptocurrency is creeping into the mainstream. More businesses are starting to accept Bitcoin, Ethereum, and stablecoins as valid payment methods, especially online.

Omnichannel and mobile-first experiences

One system that works across all platforms, syncs your data, and keeps your customer experience consistent. That's the omnichannel experience in a nutshell.

Top payment providers in 2025

We've put together some comparison blogs so you can make the right choice when picking a payments partner:

• Epos Now vs Square

• Epos Now vs Lightspeed

Recap: why the right payment solution matters

At the end of the day, your payment process is your business’s final impression—and if it’s clunky, confusing, or fails altogether, you’re not just losing money. You’re losing trust. You need a payment processing setup that actually works for you.

Next steps for your business

If you're still juggling clunky card readers, stressing about transaction fees, or manually chasing recurring invoices, it’s time to level up.

And that’s where Epos Now Payments comes in.

We’re talking all-in-one card payment solutions, built to work across your POS, online store, and mobile seamlessly. Our system lets you process credit and debit card payments, manage subscriptions, view all your payment data in one dashboard, and keep your fees transparent and predictable.

Plus, with PCI-compliant security and built-in fraud prevention, you’re protecting sensitive data and your reputation.

Talk to a specialist

So, what’s next? Simple:

Talk to one of our payment specialists today.

They’ll walk you through how Epos Now Payments can help your business save money, speed up transactions, and unlock a better experience for both you and your customers.

Let’s get you paid, properly.