Difficulties in Payments that Small Businesses and Startups May Face
When launching a startup, businesses are immediately faced with a range of potential challenges: high competition in the market, regulatory complexities, legal aspects, and more. All of this seems manageable. However, when it comes to integrating payment systems, many find themselves unprepared for the difficulties that arise in this area.
The assortment of fintech solutions today is broad and diverse, but not everything is accessible to everyone. Much depends on the industry, level of the project, investments size, and potential growth opportunities.
What challenges might new products or even well-established businesses face when searching for and integrating payment systems? Let's explore.
Payment Challenges for Startups
If we're talking about startups, everything is closely tied to the industry and overall potential of future project. In payment services, transparency and clarity are crucial, and startups often struggle with this. Additionally, when a project lacks market traction or its founders lack experience, verifying credibility of the company becomes challenging, and not every payment system is willing to take responsibility for supporting such a new entity. If it's an e-commerce project, finding a partner is relatively easier; if it's a gaming product, it's far more complicated.
Key issues that may arise:
- Difficult to find payment provider: Startups are a red flag for any established payment system, and many refuse to cooperate or demand a set of documents that the company may not have (silent rejection). The risks associated with onboarding an unknown product, especially in gaming industry, are very high and can even lead to the loss of a license or payment channels. Therefore, payment systems think twice before deciding to cooperate with any startup.
- High fees: Another common issue that is likely to face is higher fees. If a payment system is willing to work with startup, the terms and prices for solutions will undoubtedly be higher than for established businesses. This negatively affects the startup's overall profitability, and payment costs become one of the highest expenses.
- Unfavorable terms: Besides fees, other conditions may also apply, such as delayed settlements, rolling reserve, account restrictions, limits, and other restrictions of cooperation. All of this can influence startup's financial stability and reduce available working funds.
How to overcome these challenges?
When discussing high-risk industries that we work with, we add that it's important not to live in your dreams and be prepared. When creating a financial plan and budget, allocate increased expenses for payment processing and consider them from the start. Insufficient attention to this aspect often prevents creating a proper business plan and calculating real budgets that will be needed.
Prepare for negotiations and illustrate your strengths. If your team has experience in similar projects or you have already made some results — this can help negotiate more favorable terms with payment system. For example, in the highly competitive U.S. market for sweepstakes, project manager is essentially the face of it, and this aspect is given particular attention. If we're talking about the less bureaucratic iGaming market under Curacao or Anjouan licenses, cooperation with professionals with the right network can help establish a foothold. One of Monoup's flagship services is search of payment providers, including for startups. Thanks to our extensive network of partnerships in the industry, you can launch faster and on more favorable terms.
Payment Systems for Small Businesses
If we're talking about small businesses, they face significant challenges in the current economic environment. This is an underserved segment that is of little interest to anyone. Fintech companies are focused on large e-commerce projects that can generate revenue and grow quickly. And this is fair enough. After all, establishing a payment system today is expensive and complex process — it requires investments in software, personnel, licensing, compliance with various regulatory requirements, and laws. All of these are investments that owners want to recoup. Working with small projects does not allow this to be done quickly or at all.
That's why we see such a wide range of payment providers in the iGaming industry, as money circulates there, and merchants have the most diverse needs. The situation with small businesses is entirely different, and you may face a wall of rejections from popular and large payment providers.
How can a small business find a payment system?
To find a suitable provider, consider the nature of your business first. If it's not a high-risk segment, such as local services (photography, custom painting, “handyman” services, cleaning, or technical repairs) or professional services (freelance accountant, designer, artist, marketer, developer), in most countries, you can easily find an acquiring solution from any bank. For this, professionals must officially register a business as an individual entrepreneur or a small company and formally open a bank account. All these activities are understandable for any bank, and many modern banks can already offer various payment acceptance options suitable for you and your clients.
Working with a payment system for such services may be way too expensive and will only add an intermediary between your income and your bank account. However, there are good alternatives: Noda payment system recently launched a solution for freelancers in the UK with very favorable terms and accepts merchants from all industries of this type. Payment system also provides services to streamers, bloggers, who are also considered entrepreneurs but are not corporations at all. In the country of your operation, there may be a suitable payment system; if not, the best option is bank account.
If a small business is an agency or service, you may need to integrate various payment methods. For example, if it's a delivery service, you can significantly improve customer journey by placing an online order form and instant payment on your website, eliminating the need to interact with a manager. Local payment systems operating on the basis of local banks can help you with this.
In the case of launching a small business in a high-risk segment, the situation becomes even more challenging. Since high-risk involves larger turnovers, many are willing to take risks only if they exist. If these are very small turnovers, with significant risk — finding a payment system can be extremely difficult.
It's important to note that in cooperation “business + payment provider,” both sides are looking to benefit, so always look for mutually good options, not just what is beneficial for you.
Cryptocurrency as an Alternative
Today, many business models have successfully implemented cryptocurrency payments into their operations. Crypto has become an alternative that successfully allowed many industries to accept payments from their clients. Transactions without borders and with low fees — sounds perfect for anyone.
However, the experience of many countries and current global trends shows that this payment method in its current form is coming to an end. Cryptocurrency will inevitably face full-fledged regulation and declaration. Moreover, even stricter AML requirements are emerging for it, than for payments in traditional currencies. All of this can make it quite difficult to accept cryptocurrency deposits as payment for services and increase the cost of such payments.
In conclusion, we emphasize that there is nothing impossible, and every business will find a suitable payment partner in the current market. At the same time, startups and small (or growing) projects need to be prepared for challenges and not be afraid to contact professionals, such as Monoup.
