PaymentCloud is a Woodland Hills, California-based merchant services provider founded in 2015 that focuses on catering to several industries, particularly merchants categorized as high risk. The payment processor is said to be serving thousands of businesses.
PaymentCloud is a go-between that matches businesses that require merchant account services and the payment processing industry, including payment gateways, payment processors, and numerous acquiring banks. The company’s services allow merchants of multiple industries and risk profiles to start accepting multichannel noncash payments, including ACH, eChecks, mobile and digital wallets, and credit and debit cards from all card networks such as AMEX, Mastercard, Visa, etc.
In 2020, PaymentCloud acquired Paysley to expand the company’s offering into the mobile point of sale market, offering businesses to process payments via a mobile app that replicates point of sale workflows on the go.
Merchants can now set up payment gateways, virtual terminals, shopping carts, and physical point of sale terminals equipped with the latest NFC and EMV technology to start accepting payments due to PaymentCloud’s service offering.
PaymentCloud’s merchant account services also let businesses set up a “zero-card credit card processing.” This plan does not charge the merchant any interchange fee for processing credit card payments. Such fee structures pass the interchange fees onto the consumer using credit cards. Such a program is often called Cash Discounting or a Surcharge in industry jargon.
In our review of PaymentCloud, we look at how the company operates, when it was founded, what type of services the company offers, PaymentCloud’s target market, the rates charged, and any additional fees the company levies on merchants. We will explain how well businesses rate PaymentCloud’s service offerings, if there is any litigation the company is involved in, and how well PaymentCloud ranks in comparison to other payment processors.
Shane Silver started PaymentCloud in 2015, focusing on the high risk niche of merchant services. Before starting the company, Mr. Silver built his career in the high risk services division of iPayment. The company went through its first round of funding in June 2021, where the company raised $10 million in a credit facility from Expresso Capital.
The next round of funding was in the following year, in June 2022, raising $35 million from Electronic Merchant Services The funding round consisted of $10 million in equity and the remaining $25 million in a credit facility. It is unclear from public filings how much of a stake that company acquired in PaymentCloud in the funding round.
Part of the latest capital raise is thought to have been used to fund the acquisition of Paysley for an undisclosed sum. There is no public disclosure of the acquisition agreement or any other detail of the deal structure.
The payment processing industry is ripe with issues related to customer experience and support. That is one of the biggest drawbacks the industry has faced, and it has manifested into many other problems. The merchant is not treated fairly and, for the sake of gaining a client, is not disclosed details of pricing and fees transparently. Understanding that it is only a matter of time before the merchant discovers the dubious practice, they are forced into multi-year agreements and charged punitive fees if they attempt to get out of those agreements.
Looking at numerous online forums and complaints with the Better Business Bureau, the underlying theme almost always has been a poor customer experience. This is where PaymentCloud has focused its attention and is a handful of companies in the payment processing space that excels in customer support. Host Merchant Services is another great example. From the time a merchant signs up with PaymentCloud, to the time they are handed off to a Relationship Manager, the merchant is given a concierge customer service. The company’s training is thorough, their Relationship Managers are proactive, and their customer service team is available well outside of business hours.
Many types of merchants can benefit from these support hours, including any business that may need to quickly address any issues that arise. Whether it is for fund holds, reserve requirements, or a slew of other issues they are more prone to experiencing.
Outside of regular hours, support is still available for any bank-related issues or those relating to third-party vendors, such as Authorize.net. The company’s website also has a thorough section for FAQs.
Through PaymentCloud, merchants can have a one-stop shop with options such as payments, point of sale terminals, and many different tertiary services. Below is a detailed breakdown of PaymentCloud’s many offerings.
Payment Processing – The company is a merchant account provider with an emphasis on offering merchant account services to businesses classified as high risk and works with numerous acquirer banks while also partnering with various processors. The goal that PaymentCloud aspires to is partnering with as many acquirers and payment processors so that the odds of an application approval are very high, as would be the chances of ongoing availability of merchant services, regardless of merchants’ risk profiles.
Online Payment Solutions – PaymentCloud primarily uses Authorize.Net and USAePay as payment gateway solutions for online processing. Numerous other brands can also address payment gateway needs, or merchants can simply continue using their existing gateway.
Hand in hand with a payments gateway is the option for a virtual terminal. That helps by letting merchants process transactions for manual entry or sending invoices via email, with an optional USB-connected card reader. A virtual terminal is often a part of the gateway package that the merchant uses with PaymentCloud. If there are merchants that operate their online stores through some of the major marketplaces and platforms, such as Shopify and WooCommerce, PaymentCloud integrates with those platforms to offer a seamless payment experience for those merchants and their clients.
Point of Sale options – PaymentCloud offers both mobile and traditional Point of Sale (POS) systems under its own brand and through its back-end processors. These include Clover devices such as the Clover Station Duo and various other options, including tablet-based system card readers, printers, and registers. Merchants can get some of the best name brands as point of sale options through PaymentCloud. Whether is Clover for physical point of sale solutions or Authorize.Net for payments gateway, whatever the device needs, merchants can expect to get the best from PaymentCloud, both in terms of devices and deals.
Also, the company’s POS mobile solution is a result of an acquisition of Paysley. That is now a full-fledged solution offered by PaymentCloud as a mobile POS. Merchants can simply process payments using an online POS on any smart device.
Services to businesses considered high risk – PaymentCloud serves industries that are traditionally shunned by financial services and FinTech industries. Examples of some of the businesses that PaymentCloud traditionally serves include adult businesses, companies selling health supplements, credit repair service businesses, electronic cigarette vendors, and businesses within the marijuana and CBD industry, among others.
Help with the merchant account application – PaymentCloud also offers consultancy on how to get merchants through the merchant account application process. This is an overall review of merchants’ profiles, be it business operations, online reviews, or anything in the compiled documents that can have an adverse impact on getting accepted for a merchant account and helps the merchant fix any discrepancies. The whole purpose is to ensure that the merchant is successfully paired with an acquirer and ends up with the best rate possible.
PaymentCloud mainly serves businesses of high risk. As such, it’s difficult to quote a single rate as blanket pricing for such merchants. Even for businesses that are in the exact same industry selling the same product, cannabis for example. One may be ten times larger than the other and may end up getting a more favorable rate than its smaller counterpart. That is why you won’t really find pricing disclosures on PaymentCloud’s website, or on any other public forum. As such, pricing for companies carrying a higher risk profile is determined on a case-by-case basis.
Businesses earn a high risk classification based on the nature of their business, the industry they are a part of, or the founders’ general risk profile, among various factors. Certain companies pose a threat of financial loss or reputational damage by working with them. In such cases, merchant account services are challenging to find for those businesses as they are deemed too risky either because of social or moral standards. Some examples of such businesses include adult entertainment sites, gambling businesses, gun retailers, and cannabis vendors, among others.
Beyond the social and reputational dilemma, regulators have historically orchestrated efforts to bar such businesses from flourishing by inhibiting their entry into traditional banking and financial services channels. The US Department of Justice’s Operation Choke Point is a perfect example of such a regulatory overshoot. Although banking regulators such as the Federal Reserve and the Federal Depository Insurance Corporation eventually backpedaled on enforcing those efforts, most banks still loathe doing business with such merchants. Now, even the major card networks, such as Mastercard and Visa, are devising innovative ways to erect barricades to ringfence high risk businesses from payment processing services.
As a result of these dynamics, merchant acquirers willing to work with such businesses charge hefty interchange rates. And those rates are commensurate with the degree of risk the acquirer is taking on by working with a given high risk business.
PaymentCloud offers a multitude of pricing models. One pricing option is tiered pricing. Tiered pricing is a pricing model used by some payment processors to charge merchants for processing credit or debit card transactions. In this model, the processing fees are divided into several tiers, each with a different fee structure based on the type of card being used, the transaction size, and other factors. Transactions that meet specific criteria, such as having a large transaction amount or being made with a premium credit card, are placed into higher tiers and charged higher fees. Tiered pricing is often considered less transparent than other pricing models because the exact price for a transaction may not be evident in advance, making it difficult for merchants to budget and compare costs accurately.
Alternatively, the company also offers interchange pass-through pricing. This is a pricing that charges merchants for processing noncash transactions. With interchange pass-through pricing, the processor adds a markup to the cost of each transaction, known as the “interchange fee,” which is set by card networks such as Visa, Mastercard, and others. The markup is a fixed percentage of the transaction amount and a fixed per-transaction fee.
This model provides greater transparency and allows merchants to better predict and compare processing costs, as the markup is consistent for all transactions. The interchange fee and the processor’s markup are separated, allowing merchants to see precisely how much they are paying for each component of the processing fee. Interchange-plus pricing is often considered more cost-effective than other pricing models, particularly for businesses with high transaction volumes, as the markup is constant regardless of transaction size or type.
Interchange pass-through rate of the card network (Visa, Mastercard, etc.) that is passed through along with an additional rate ranging from 0.10% to 0.50% of the transaction amount. Each transaction is also charged anywhere from 15¢ to 25¢.
Card present transactions – transactions where the card is physically present at checkout and is either swiped, dipped, or tapped at the POS terminal.
Interchange pass-through rate of the card network (Visa, Mastercard, etc.) that is passed through along with an additional rate ranging from 0.05% to 0.30% of the transaction amount. Each transaction is also charged anywhere from 8¢ to 10¢.
Similar to their payment processing rates, PaymentCloud is discreet about its various fees applicable to merchants. Numerous fees apply, including monthly fees, gateway fees, as well as fees for AVS and other two-factor authentication, non-compliance fees, and chargeback costs, among many more.
PaymentCloud does not assess charges such as application fees, account setup, or gateway setup fees, although there will be costs associated with the actual price of the gateway charged by third-party vendors offering the gateway, which are usually passed through to the client. The company also does not charge fees for PCI compliance or any form of annual fee. Some specific fees that PaymentCloud charges include:
Monthly Fee – $10 – $15 depending on merchant risk category (card present vs. CNP)
PCI Non-Compliance fee – $10/month
Batch Processing Charges – $0.30/batch
Transaction retrieval fee – $8/retrieval
Chargeback fee – $25/chargeback
It’s important to note that high risk merchants will pay for merchant services. The fact that the merchant is of higher risk almost guarantees they’ll be offered a tiered pricing plan, priced based on the transaction’s risk severity. They are almost certain to incur higher fees and are also subject to something called a rolling reserve requirement.
A reserve requirement for high risk payment processing refers to a percentage of the payment volume the payment processor must set aside as a reserve. This reserve serves as a guarantee for potential losses in case of fraud or chargebacks. The percentage required for the reserve can vary based on the type of risk associated with the payment processing activity, and the processor may hold the funds in an escrow account. The reserve requirement’s purpose is to protect the payment processor and merchants from potential financial losses.
There is no current litigation that PaymentCloud is subject to from any of its customers. However, in early 2020, the company faced a civil lawsuit from another payment processor, Merchant One, who claimed PaymentCloud violated their agreement for monthly residual income from customers referred by Merchant One. The court initially rejected the complaint, stating it was a “shotgun pleading.” Merchant One then filed a revised complaint, which the judge subsequently approved. The issue was eventually resolved between PaymentCloud and Merchant One through an out-of-court settlement.
Regarding the specific legal terms that merchants may be subject to, PaymentCloud may require customers to sign a two-year contract with a termination fee. According to a one-star Google review from a merchant, the sales agent did not fully disclose the contract terms. PaymentCloud responded to the complaint by saying the details were in agreement and offered to refer the merchant to another processor that would waive the termination fees.
It is important to remember that PaymentCloud operates as an aggregator of services and is not a payment processor itself. The company has to work in this manner to find a willing merchant acquirer for any type of merchant, regardless of risk profile. Due to the multifaceted nature of their business and the numerous parties involved, it is likely that some merchant acquirers that agree to provide services through PaymentCloud will likely look to lock in merchants over multi-year agreements.
There is a tremendous amount of work involved in servicing merchants that are flagged as a higher risk; a larger team dedicated to classifying riskier transactions, helping to institute risk-mitigation efforts, and to train the merchant and their team members to be able to identify fraudulent behavior and to ensure that safeguards are being implemented.
All this results in a higher cost basis for the acquirer which will take longer to recoup. In such instances, it is difficult to initiate merchant customers and go through the entire onboarding process only to have that merchant leave on a month’s note. As a result, many acquirers resurrect walls in the form of contract terms that may last anywhere from three to five years and may carry a one-time fee should merchants decide to cancel such agreements before they are set to expire.
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PaymentCloud does not have a profile with the Better Business Bureau, so we looked at reviews and complaints on various online forums, including Google Reviews. The company actively responds to these and helps merchants resolve issues. In general, the company has positive feedback from merchants who praise PaymentCloud’s customer support, the effort the company makes to find a merchant account provider for high risk merchants, and how the onboarding specialists have a continuously open line of communication with them.
It’s worth noting that PaymentCloud primarily serves businesses that are considered high risk within the payment processing industry. It is important to note that the company focuses on the nuances of each business. Some acquirers may work with gun merchants, but not adult businesses, and others may have concerns about cannabis merchants. PaymentCloud has connections with many payment processors and acquirers, so it can successfully connect the hardest-to-place merchants with an acquirer.
Another aspect of merchant services is that high risk businesses are subject to fund holds and reserves by their acquirer. It’s simply what the process of processing payments entails. Once a payment is initiated, the acquirer checks with the issuer to make sure there are enough funds to cover the cost. Until the chargeback period (six months) lapses, the acquirer has extended the merchant a line of credit, and reserves are the only way the acquirer can recover costs if there’s a successful chargeback.
Regarding this process, there is a customer complaint where efforts to resolve issues faced by a merchant regarding fund holds led to a complete breakdown in communication. It’s one complaint that made it to online forums, so it may be an exception or possibly a canary in the coal mine, emblematic of the company’s attitude and communication on a subject as common as fund holds.
Since PaymentCloud tries multiple acquirers to get the best rate for high risk merchants, many may find the process exhaustive. Some merchants also reported being overwhelmed by numerous requeststo initiate their merchant account service. However, in all fairness, these few complaints do not accurately reflect the overall image and reputation of PaymentCloud. They simply highlight some negative aspects of the company’s operating norms.