Guide on small business payment processing in Australia

Getting paid is a big part of running a business. To do this efficiently, you’ll need a system that allows you to accept and process payments. This system will allow you to actually complete sales online or in-store, manage your finances, and meet growing customer expectations.

This guide breaks down different aspects of small business payment processing in Australia. We’ll cover what’s involved and what it all means, the main costs, and how to set up a system so you can start accepting cards, bank transfers, and other payment methods, both domestically and internationally.

Importance of payment processing for small businesses

Small business payment processing is essentially the ‘lifeblood’ of a business, facilitating the flow of money from sales or services into your business bank account.

In Australia, credit and debit cards account for around 75% of all payments¹ – payment processing lets you accept and settle these, alongside other ‘alternative methods’ such as PayPal, Pay ID, and BNPL options like Zip. If customers can’t pay the way they expect, they’re more likely to go elsewhere, often to a competitor that makes it easier.

It also affects how your business runs behind the scenes. When everything is set up properly, payment processing supports:

• Cash flow - faster authorisation and settlement allow you to get quicker access to your money, so you can cover expenses and plan ahead.
• Compliance - Automated systems reduce manual work for bookkeeping and Goods and Services Tax (GST) reporting, which is mandatory for businesses with a turnover of $75,000+².
• Customer relationships - flexible, reliable payment options create better checkout experiences and build trust over time.

What does payment processing for small businesses look like?

A typical payment processing flow covers three distinct ‘stages’:

• Transaction initiation - the customer enters their payment details or taps their card via a POS system, online checkout, or payment link.
• Authorisation - the payment is checked with the customer’s bank to confirm the right funds are available.
• Settlement - the approved funds are then transferred to your business account, typically within 1-3 days.

For small businesses in Australia, this chain of events applies across pretty much every transaction, including in-store purchases, online sales, and international payments. The main thing that usually changes is the mix of tools and systems you use for payment processing.

Key components involved in payment processing

To make that flow work, from initiation through to settlement, there are several components or systems working together behind the scenes.

1. Payment gateway

The payment gateway is a piece of tech that securely captures and transmits payment details. It plays a big part in all online transactions, acting as the bridge between your checkout and the wider payment network. This is what gets the whole process under way.

2. Payment processor

The payment processor handles the transaction itself after receiving the payment details. It sends payment data between banks and card networks, checking if the customer has enough funds to complete the payment, and making sure the money is transferred to your account when everything is approved.

3. Merchant account

A merchant account temporarily holds the funds after a transaction is approved and before they’re transferred into your business account. You can get separate merchant accounts (more complex), but quite a few providers bundle them into a single payment processing system to make things easier.

4. Business account

A business account is where your funds land at the end of the process. For micro and small Australian businesses, this is typically an AUD account, though international sellers like e-commerce sites and dropshippers may use multi-currency accounts.

5. POS systems and payment tools

For any in-person payments, you’ll need card readers and terminals to facilitate payment processing. For online payments, it’s likely to be checkout pages or payment links, which providers may offer as part of their broader services.

6. Reconciliation and reporting tools

These are tools that track transactions and match payments to invoices, helping you to keep everything organised for accounting and tax purposes.

Costs associated with a payment processor for small business

Here are the common fees that you’ll need to budget for when using a payment processing provider.

• Account setup fees - this is often a one-time fee for setting everything up. Not all providers have these, but it’s something to be aware of.
• Monthly fees - some providers charge a fixed monthly fee, like a subscription, to access their platform or tools.
• Transaction fees - usually a small percentage of each payment (e.g., 1.5–3%), with a fixed AUD fee added on top. These also vary depending on the payment method – card payments usually cost more than bank transfers.
• Interchange and network fees - these are charged by networks and issuing banks, often bundled into the overall transaction cost.
• Service fees - some providers charge for ‘add-on’ services like fraud protection or subscription billing. Check the provider’s full pricing breakdown.
• Disputes and chargebacks - if a customer disputes a payment, you are likely to be charged a set fee to process the reversal.
• Refunds - you might not be charged to process refunds, but most providers keep the original transaction fee.

How to set up a small business payment processing system

Fortunately, you don’t need lots of technical expertise at every stage to put a system in place. It’s mainly about making the right choices early on.

Step 1. Map your sales channels and tools

Start by defining exactly how customers will pay you. This is often dictated by your industry and business type. For example, an ecommerce store will need a secure online checkout, while a local café in Melbourne might rely on card terminals and tap-to-pay.

Listing the payment tech you’ll need upfront helps to avoid overcomplicating things and reduces the chances of wasting money.

Step 2. Choose the right payment methods

Next, decide which payment methods you’ll accept. Australian customers value flexibility – cards are very popular, but as we noted earlier, alternative options are becoming more common, too.

If you regularly work with other businesses, bank transfers might be a priority. Meanwhile, dropshippers and others selling internationally will need to think about foreign currencies and local payment preferences.

The aim is to make it as easy as possible for people to pay you, without adding unnecessary costs or complexity to the system.

Check our guide on secure payments to find safe methods Australian businesses can use. [link to secure payments blog]

Step 3. Select your payment processing tools

Now you know how you want to get paid, start looking at tools that support it.

This might include:

• A payment gateway for online checkouts
• A POS system or card reader for payments in person
• Invoicing tools for billing clients
• A business account that can receive and hold payments

Some providers bundle all of these in a single platform, but you can pick and choose separate tools. Also, remember to factor in the costs outlined earlier.

Step 4. Register and verify your business

You’ll need to register with your chosen provider to start accepting payments. This usually involves submitting your business details, verifying your identity, and linking a business bank account where funds will be deposited. Australian businesses may need to provide an ABN or ACN.

Step 5. Integrate your systems

With your accounts ready, the next step is to connect everything. Link your payment system to your website or POS system, and look for other integrations to connect the dots between other tools you use. For example, pairing your accounting software is great for automatically tracking transactions.

A well-integrated system will mean your payments, records, reports, inventory (and more) update in real time, so you don’t have to manually coordinate things.

Read our blog post on integrated payments for more information. [link to integrated payments blog]

Step 6. Establish reconciliation and reporting

Finally, when everything is live, set a routine to manage your finances. You’ll want to regularly reconcile payments with sales or invoices, as well as monitor incoming funds and review overall costs. Keeping accurate records is mandatory in Australia; the ATO requires you to hold financial records for at least 5 years³.

Challenges involved with international payment processing for small businesses

Selling outside Australia opens up new opportunities, with bigger audiences and a global reach. But it also introduces new challenges if you’ve only prepared for payment processing locally.

One of the biggest challenges is making sense of and absorbing the costs of constant currency conversions. If you’re paid in foreign currencies but operate in AUD, this is likely to be a daily battle. Exchange rate markups can quickly eat into your margins.

Then there are cross-border fees – international card payments and transfers often come with additional charges. These vary depending on the countries involved and the payment method used, but you’ll need to be constantly vigilant about how all these markups affect your finances and cash flow.

Other challenges include:

• Longer settlement times - payments take longer to settle into bank accounts, typically 2-3 days.
• Meeting regulations - compliance and regulations around things like payment security, how data is handled, and reporting requirements differ by country.
• Delivering a good customer experience - audiences in overseas markets still expect a seamless checkout, with local payment methods and support for their own currency.

Wise Business: Simplifying International Payments for Australian Businesses

Expanding a business globally opens up exciting opportunities, but also new challenges like receiving payments across borders. Hidden foreign transaction fees and hefty currency conversions involved with international payments can eat into your profits and time.

Wise Business serves as a cost-effective solution where you can receive money from around the world at the speed and price of local payments.

Transform the way you receive payments with Wise Business:

• One-time fee of 65 AUD for local account details in 8+ currencies, including AUD, NZD, USD, and more—no recurring fees
• One account to hold, send, and convert money with no hidden fees or exchange rate markups
• Create and send professional invoices directly to your customers through Wise Business
• Create payment links to request money in specific currencies
• Seamlessly receive payments from customers, online sales, or PSPs like Stripe and Amazon.
• Wise is safe and secure - Trusted by 13 million people and counting

Sign up for the Wise Business account! 🚀

This general advice does not take into account your objectives, financial circumstances or needs and you should consider if it is appropriate for you.

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Sources:

1. RBA gov au - The evolving retail payments landscape
2. ATO gov au - Registering for GST
3. ATO gov au - Overview of record-keeping rules for business