What is merchant services?

Merchant services refer to financial services that allow businesses to receive using debit, credit cards, and other electronic payment methods. According to the U.S. Census Bureau, there are over 191 million credit card users in America. Electronic cash has gained popularity over the past 10 years. Therefore, it is necessary for businesses to offer options that accommodate the new technology.

A merchant processing account allows businesses to receive payments, which are then held for a particular period before transfer to the bank. If you have done online purchases, you have interacted with a payment processing system. Merchant service allows customers and sellers to have smooth and secure transactions. But there is a lot that happens beyond the keying of details and putting passwords, which affect your operations.

Before the invention of merchant services, customers could withdraw money from the bank, pay the merchant, and the merchant deposits the money back to the bank. To make this easier, the buyer can now transact without going through a brick and mortar banking hall. The concept saves time and money for the bank, as well as the merchant and customers.

Common Terms in Merchant Services

Merchant service provider (acquirer): a company that acts as an intermediary between the bank, seller, and the customer.

Merchant account: a bank account that holds the money from the buyer and allows a deduction of all the necessary charges from the merchant. A merchant account should not be confused for a bank account because it only allows debit, credit, and electronic money payments.

Issuer: a financial institution that offers cash advance through credit cards or issues debit cards to customers.

Payment gateway: online software that allows transactions through the internet from one card to another.

Debit cards: a plastic money technology that allows you to access money from your checking account.

Credit card: a plastic money technology that gives cash advance and allows you to make transactions without your bank balances.

PCI Compliance: regulatory requirements that ensure the safe use of credit and debit cards to avoid fraud flagging.

Virtual terminal: a merchant service that allows the business to receive payment from plastic money without the card’s actual presence.

Participants in Merchant Services

Credit card processing (another name for merchant processing) involves the business, merchant service provider (MSP), and a bank. The bank provides a merchant account to receive the amount transacted throughout the day, week, or another set period. Before transfer to the bank, the money is held by a merchant provider.

The business can use a point of sale software to charge clients and record the transactions. The business owner closes the transactions and deposits the amount to the bank account.

Frequently asked questions

Merchant services are essential for both small and established businesses. They not only offer the payment platforms but also ensure the security of your customers’ data. You also don’t have to worry about PCI compliance, which is a major concern for startups. Your account can be frozen if you are not compliant.

The idea of MSP is to help your business transact flawlessly without affecting your profits. The charges for merchant services are usually below 5 cents for every transaction. Your customers are not charged any fee; therefore, it does not affect them.

Because a merchant account is not a transaction account, you want the bucks to be in your bank account as soon as possible. It should take less than 2 days to process the money from your merchant to a checking account.

Although the two are interdependent, they serve different purposes. A payment gateway allows your business to receive online payments while merchant services provide a holding wallet for the payment before transfer to your bank account.

Cryptocurrency is a new technology that allows transactions without a central regulatory body. Bitcoin falls under this category. Bitcoin merchant services help businesses to receive the cryptocurrency in their local currency within 48 hours after the payment.

Some of the most common merchant service fees include interchange transfer, markup, PCI compliance, account setup, and cancellation fees. Although it is not a must to be charged all the fees, it is essential to confirm from the provider the charges.

When selecting an MSP for your small business, you should consider the fees, PCI compliance, and complimentary services. It can be costly to source services like the point of sale and credit card terminals from another company. Full disclosure of all the fees on the part of the provider is also an essential factor.

If you are looking for a reliable merchant service provider that will help your business grow through seamless transactions, get in touch with us today. You can get all the services of an MSP under one roof and cut on the cost and time of consolidation.