Merchant services provider

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Merchant services provider

What are merchant services in banking?

Merchant services refers to the handling of electronic payment transactions. They would generally work through an account that a merchant will set up to enable credit card processing. 

Merchant Service Provider
Source: Software Advice

What is a merchant services provider?

Merchant services providers are entities that offer solutions, financial platforms, relationships, and all the aspects that businesses require for the purpose of accepting and processing credit or debit card payments. These are companies or services that grant your business access to all the tools that you need in order to process and handle your transactions. They are essentially organizations that empower your business to accept debit and credit card payments online as well as offline.

Merchant services providers makes the payment acceptance process easier and helps merchants expand their payments options, earn more money at a faster pace, and offers numerous other benefits as well.


What are the types of merchant services providers?

Types of merchant services providers

There are several types of merchant service providers, all of which offer different kinds of solutions. Some of these merchant service providers are better suited for smaller businesses, while others work with large enterprises and franchises.

Here are some of the most common types of merchant service providers:

Merchant account providers

Merchant account providers typically provide you with basic credit card processing facilities so that you get your money when your customers make online or offline payments to you. They generally offer processing services that are compatible with the largest credit card networks like Visa, Mastercard, American Express, etc. They would have tiered services on offer, so the type of processing services that you receive depends on the amount of money that you spend on your merchant account providers.

Payment Service Providers

Payment service providers present an alternative solution for businesses that wish to accept several payment methods. Generally, smaller businesses don’t really require a  full merchant service provider to accept credit or debit card payments. Payment service providers like PayPal and Square make it far more convenient to receive online payments without having a dedicated account. 

Payment service providers are great options for businesses that wish to have lower costs and simple technology. The issue with payment service providers is that it is possible that they’d freeze your account without any warning.

Payment Gateway Providers

Payment gateway providers started growing in popularity along with eCommerce and online sales. They make it much easier for you to accept online payments. They might even offer a merchant account, but that’s not always the case. 

Quite a few of these companies provide gateway-only services so that businesses can have more flexible solutions to manage their online payments.

What are the features of merchant service providers?

The features that you get from your merchant service provider account will be dependent on the type of service that you opt in for. A few of them only provide you with processing services, but others even assist you with PCI compliance, protection from chargeback fees, and more features.

A lot of merchant service provider companies will let you pick and choose from a range of services and products that would help you run your online business in a better and easier manner. But all businesses, in order to accept online payments, would need to have either a merchant account or a payment service provider account.

Here are some of the features that you could get along with your merchant service provider account:

A merchant account

These are vital accounts that perform the role of middlemen between your customer’s bank account, and your business bank account. A full merchant account would provide you with an ID number that would help in protecting you against issues like fraud. If you only have a payment service provider account, you would still be able to accept payments, but that kind of account would not grant you the same level of support or protection as a merchant account would.

Your merchant account is essentially the place in which the money received from your customer’s payment card will get stored before it later gets deposited into your bank account.

Credit card terminals

Credit card processors can be physical or virtual, depending on your business’s needs. If you’ve got a physical store you’d need credit card processors that you can use to collect payments from your customers in-store. You could get a card reader from merchant services account providers, but you could even get terminals from payment service providers. Some terminals make contactless or pin-free payments possible (which has been encouraged due to the pandemic), while some terminals accept payments from smartphones.

Point of Sale systems

Point of sale (POS) systems aren’t the same as card terminals and payment processing hardware. Rather, these systems merge the functions of your card terminal with a computer display with included software. The software on your point of sale system will aid you in many things like inventory management, analytics, etc. You can use it to track your sales, collect data for tax purposes, etc. A lot of POS systems sport add-on options like receipt printers, and dedicated scanners.

Payment gateways

Payment gateways are a very common feature for merchant accounts as well as payment service provider accounts. They connect your service provider’s processing networks to your website thus enabling you to accept payments via the internet.

You might have to pay a monthly fee in addition to the processing fees that you anyways pay if you wish to use this feature.

Virtual terminals

These software solutions are provided over the cloud. They can be used to turn iPads, tablets, or computers, etc. into portable point of sale systems. Transactions could be manually entered into the system, or you could make use of a USB connected card-reader for that purpose.

Online shopping cart

While some merchant service providers do assist you with shopping cart software too, in most cases it would be better to use your eCommerce site building tool for that. But inspite of that, you should check whether your cart is compatible with your merchant services provider.

Merchant cash advancesThis are useful if you want to launch a new business. You might have to pay a percentage of your earnings to the company providing you with the cash advance until you repay the amount that you owe them.

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