A merchant account is required if you own a small business that accepts electronic payments.
Merchant account solutions enable you to process debit or credit card payments just like a bank account for your business. Choosing the perfect and complete merchant solutions provider might be difficult since there are too many possibilities.
We will go over everything that you have to learn regarding merchant account solutions, free payment processing, as well as how to select the perfect solution for small businesses in this article.
Credit Card Processing
In the United States, there are an estimated one billion credit cards. According to Statista, credit cards are now the most common payment method among Americans.
These transactions require only a few seconds due to free payment processing technologies. The payments arrive in your wallet within two days. These numbers of credit cards show that credit card payments are an integral part of the customer experience.
So, irrespective of what business you are doing, if you are receiving payments from clients, you will need to be configured for processing credit card payments.
Understanding how free payment processing works is helpful. That is because you will be able to identify the type of merchant account solutions you require after you have sufficient information.
The flow of credit card processing
Here you will figure out who’s engaged in credit card transactions.
We will go over everything that you have to learn regarding merchant account solutions, free payment processing, as well as how to select the perfect solution for small businesses in this article.
The client
Clients are individuals who are interested in purchasing your products or services. Their credit card was issued by a financial institution, generally known as a bank.
Merchant
As a business owner, you will require a merchant account of a merchant bank for processing credit card payments. Your business could take card payments in two different ways. A digital payment channel is used to handle e-commerce purchases. A credit card reader is used to accept payments in-store.
Transaction gateways & processors
It collects information about your customers, does a security check, and deliver payment details to acquiring processor/bank. The payment is connected with card networks such as Visa and Mastercard by the processor.
Card networks (also known as payment networks) perform an extra security check before transmitting transaction information to the financial institution that authorized the card.
Issuing bank
The bank performs a further security check before approving or declining the transaction.
You will be responsible for payment processing costs, which include:
Interchange fees
Costs for transferring payments from the client’s account to your account are referred to as interchange fees. These fees are generally received from card associations and given to your client’s bank.
Transaction markup
The fee that the payment processor charges you on completing the transaction is known as the transaction markup.
Flat fees
Many processors cost you per month fees for utilising their services.
Incidental fees
you will have to pay fees if you have a chargeback. The fees may vary, so look for a company that has a clear pricing strategy. Some free payment processing providers, for example, will charge additional transaction costs according to the risk associated with each payment. As you may anticipate, this could lead to unexpectedly hefty expenses.
Types of Credit Card Payment Processor
Payment processing through secure merchant services providers is one alternative, but it isn’t the one and only.
Credit card or payment processing can be done in several ways, including:
● Banks
● Independent Sales Organizations (ISO)
One could believe that approaching your financial institution for credit card transactions is the simplest choice. After all, there’s already a relationship. Even after accepting your application, your bank may recommend you to merchant account solutions for further secure merchant services such as point-of-sale (POS) software and payment technology such as a card reader.
Independent Sales Organizations (ISO) and Merchant Services Providers (MSP) serve as a conduit between all parties involved in the payment processing system. As contrasted to financial institutions, such third-party complete merchant solutions are usually more flexible and affordable.
Merchant Services
Merchant services are also banking services allowing you to accept electronic payments. Mobile payments, debit cards and credit cards are all included. Furthermore, complete merchant solutions encompass the hardware and software you’ll have to process electronic transactions. The organisation that can make all this possible is a secure merchant services provider (MSP).
Why do You Need a Merchant Account?
We will break down any basic credit card payment to help you understand why you would need a merchant account.
The three-stage of credit card processing are:
1. Authorization
2. Settlement
3. Funding
Following are the steps that occur at the authorization stage:
● Your consumer makes a purchase; this could be done through the virtual shopping cart or also by swiping the credit card.
● Payment authorisation is requested by the shopping cart or POS terminal from the transaction processor.
● The credit card issuer receives transaction information from the payment processor (e.g., Visa, MasterCard, Discover, American Express)
● The transaction data is subsequently sent on to the financial institution that authorized the card by the credit or debit card company.
● The bank subsequently authorises or rejects the payment depending on the condition of the user’s account, and you will be notified.
Following are the steps that occur during the settlement as well as funding stage:
● In end, you will transmit authorised payments to your credit card processor. These payments are taken from the customer’s bank account.
● The payment is charged to the client’s account by the client’s bank.
● The payments are transmitted to your account once the service charges have been deducted.
● Lastly, within 2 days, your bank transfers the payments to your account.
● Consider a merchant service provider to be a middleman between credit card issuers, customer’s bank and your bank. They enable you to safely take electronic payments.
Selecting a Merchant Service Provider
There are various factors to consider while selecting a merchant service provider:
● Whether or if the company accepts the payments your customers wish to make (e.g., Android Pay or Apple Pay, other credit cards, POS terminals)
● Fees for payment (e.g., different charges for swiped vs keyed-in payments)
● Costs due to equipment rentals (eg: scanners, cash drawers, receipt printers etc.)
● Amount MSP charges in transaction fees
● The convenience to use, as well as whether or not it may be integrated into the software.
● Virtual terminal: enabling you to collect payments digitally
● The duration takes for the business to get their payments
● PCI Compliance for protecting your customers’ financial information
● Analytics and reporting features
keep these guidelines in mind while you look for a secure merchant services provider.
Savvy Merchant- Best Merchant Service Provider
In today’s fast-paced world, it needs expertise, perseverance, and commitment to scale your business. Partnering with a reliable provider that offers complete merchant solutions makes a lot of difference to payment processing. Savvy Merchant’s payments experts can assist you in choosing the best tool for your small business, whether you want a simple approach to accepting transactions or an advanced solution, so you could concentrate on growing your business.
