How Does Payment Processing Work? Self-Care Business Guide

‍In the beauty and wellness industry, every transaction is a reward for your hard work and creativity. And cold, hard cash is a physical representation of what you’ve earned. But in today’s world, digital payments are where it’s at.

Digital payments are quicker, more secure, and way more convenient for you and your clients. Plus, payment processing systems keep everything organized and make tracking earnings a breeze.

Ready to ditch old-school methods and embrace the future? Learn how payment processing works and how to find the right system for your business. 

What Is Payment Processing?

Payment processing is the behind-the-scenes magic that allows you to accept digital payments, whether clients a credit or debit card, contactless payment, or a digital wallet. Processing systems move funds securely from a client’s account to yours in a matter of seconds.

For beauty and wellness businesses, a reliable payment processing system speeds up checkout and helps you stay on schedule. You get paid faster, and who doesn’t love a direct deposit?

Plus, even if you’re a math whiz, manually tracking payments and calculating taxes or tips is a hassle. With a solid payment processing system, everything is automated, making it easier to manage your finances, reduce costly errors, and focus on what you do best: giving clients exceptional service.

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How Payment Processing Works

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Behind every smooth transaction is a series of complex actions that ensure accuracy and security. Let’s break it down step by step:

1. Transaction Initiation

When your client’s ready to pay, guide them to your point-of-sale (POS) system, where they swipe their card or scan their phone – also known as transaction initiation. This action sets the entire payment process in motion.

The initiation can also take place online. Say your client wants to put down a deposit for their next appointment, buy a gift card for a friend, or purchase a new product. All they have to do is enter their payment information, and bam! The transaction is underway.

2. Payment Gateway

The payment gateway is a secure channel that transmits your client’s payment information to the payment processor (the company that facilitates the payment, like GlossGenius). It encrypts the data to protect it during transmission, safeguarding sensitive details from potential breaches.

3. Payment Authorization

At this point, the payment processor takes over. It communicates with the client’s bank or card network to request authorization for the transaction. 

To authorize the payment, the bank ensures that the client’s payment method is valid (expired and stolen credit cards won’t work). It also checks that the account has sufficient funds or credit available. The bank might also screen for potential fraud, which is why new clients sometimes have to manually approve purchases, usually within their bank’s mobile app.

Once the bank verifies the transaction, it sends a message back to the payment processor – either approving or declining. If approved, the transaction moves forward through the payment gateway, and your client’s account is charged. If declined, your payment system informs the client, and they may need to try another payment method.

4. Transaction Completion

Now the transaction is technically complete on the client’s end. The funds are temporarily held in their account, waiting to be transferred to your business. You can give them a receipt or payment confirmation, and they can go on their way.

5. Transaction Settlement

It’s time for the settlement phase. This is where your payment processor communicates with the client’s bank to transfer the funds to your account. 

Usually, you settle all transactions at the end of the day. This way, you can consolidate multiple transactions into one batch. This streamlines your accounting processes and also helps minimize transaction fees. After you settle, you typically receive the funds within a few business days.

6. Payment Reconciliation

Once the funds from your sales make their way into your account, you have to reconcile your books. Compare your transaction records with the deposits in your bank account to ensure everything matches up. You’ll want to know right away if there are any discrepancies because it could be a sign of fraud or theft. 

7. Financial Reporting

Your payment processor should provide detailed reports that summarize your daily, weekly, monthly, and even yearly transactions. These reports give you valuable insights into sales volumes so you can assess your business’s financial health. They’re also crucial to have on hand for tax season.

5 Features To Look for in a Payment Processing Solution

You need a payment processing solution that works as hard as you do. It’s important to pick a system that doesn’t just get the job done, but does it fabulously – something that makes your life easier and your clients happier. Let’s take a look at five must-have features:

1. Cost Effectiveness

Payment processing fees are inevitable, but finding a cost-effective solution can make a huge difference in your bottom line. Ideally, you want a processor that offers a flat rate, which makes your costs predictable even if your appointment book is bursting with back-to-back clients. For example, GlossGenius has a flat 2.6% processing rate, regardless of payment frequency or type.

Also keep an eye out for hidden transaction fees. Does your payment processing system charge you extra for online purchases, refunds, or larger payments? These small costs add up fast, so make sure the platform you go with has a transparent, no-nonsense approach to pricing.

2. Team Member Access

If you work with stylists or estheticians who rent booths from you, or wellness pros who earn commission, you need a system they can access. This organizes everyone’s finances without any extra fuss, empowering everyone to handle their clients’ checkout experiences and receive direct payouts to their own bank accounts.

With GlossGenius’ staff management solutions, you can give your team exactly the right amount of control when it comes to payment processing. Our platform lets you customize permissions and run reports so you can know who’s killing it with sales. No matter how big or small your team is, we’ve got you covered.

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3. Instant Payouts

Imagine getting paid instantly for that balayage you just finished. You wrap up the appointment, swipe the client’s card, and the funds are in your account so fast you can buy a celebratory iced latte. Yes, please! 

With most payment processing solutions, it takes a few days for funds to hit your merchant account. If you want to speed it up, you have to pay extra. But with GlossGenius, you can get paid in as little as half an hour. We also offer same-business-day transfers for free, so you can keep your cash flow as fresh as your client’s new looks.

4. Client-Friendly Checkout Experience

Let’s talk about your clients for a second. They just got pampered, and the last thing they need is a clunky checkout experience that counteracts the service’s stress-relieving effect. Checking out should be seamless, quick, and super easy. It can even be fun with a stylish card reader. Catch your clients' eyes and make the whole process feel sleek and professional.

Your system should accept payments of all kinds so your clients can use the payment methods they love most. It should also have fast credit card processing capabilities and easy-to-read prompts. And don’t forget about tips. A simple prompt can encourage clients to leave a little extra love in the form of a percentage or custom amount – no awkward moments or annoying mental math involved.

5. Transaction Security

Your clients trust you to take care of their beauty and wellness. They need to trust that their payment information is safe, too. Look for a payment processor that prioritizes transaction security, with built-in encryption, multi-factor authentication, and fraud protection.

Transaction security doesn’t just protect your clients. It safeguards your business from potential fraud, unauthorized transactions, and other expensive mistakes. Even better, with GlossGenius, you can get chargeback protection that could save you hundreds if a dispute ever arises.

Elevate Your Beauty and Wellness Business’ Payment Process With GlossGenius

GlossGenius is the ultimate partner for beauty and wellness businesses. Our payment processing solution has all the features you need (and then some), from Instant Payouts to fast and flexible Payments. Plus, we offer features like Online Booking and Marketing tools that keep your clients coming back – and your bank account full.

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Ready to slay the payment game? Start your free trial with GlossGenius today.