In this master guide on merchant account services, we’ll explain what merchant services are, how merchant services work and how having merchant services can benefit your business. If you don’t know anything about merchant account services – do not worry. We’ll run through everything you need to know!
What are Merchant Services?
Merchant services are services that are offered by merchants (bankers, payment processing companies, financial institutions, etc.). The broad category that merchant services fall into is that merchant services is payment processing or anything relating to your businesses revenue from your bank or merchant.
For quick reference, the table below is what a typical merchant account service provider will offer to businesses who need merchant services:
|Point Of Sales Systems||X|
|Credit Card Terminals||X|
Merchant Account Services: Payment Processing
The most common reason for getting a merchant service provider is the access to their payment processing system. What is payment processing? Do you need merchant services for payment processing? What are the benefits of using a merchant account services provider for payment processing?
Read on and we’ll answer all of your questions and more!
What is Payment Processing?
Payment processing is when your processor moves your money securely to your bank or merchant bank account while handling statements and all of the inbetweens.
Do you Need Merchant Services for Payment Processing?
Fun fact: you actually don’t need traditional merchant services through your bank or a payment processing company to process your payments – however, if you don’t use a merchant services provider, you’re exposing yourself to several disadvantages.
The biggest disadvantages to processing payments without a merchant services provider:
- Less secure end-to-end transactions
- No financial support / audits or analysis
- No automations for settlements
- You are responsible for your own POS or processing terminals and your own integrations
- No support for chargebacks
The list of disadvantages really outweighs the advantages of it.
Something that is pretty unknown is that even if you are selling a good or service and you’re accepting payments through PayPal you’re actually using merchant services.
What are the Benefits of Using a Merchant Account Services Provider for Payment Processing?
There are thousands of benefits of using a merchant account services provider for payment processing however, these are what we consider to be the biggest advantages:
- Secure transactions
- Financial support
- 24/7 customer support
- Free POS or payment processing terminals
- Multiple integration points for websites or local retail
- Check, ACH, Debit or Credit support
The simple truth behind the question “Do I really need a merchant services provider for payment processing?” The short answer is yes. If you want to run a legitimate business and minimize any risk or financial loss you should let a pro handle the backend for you so you can focus on what you do best.
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Payment Processing Terminals
You’ve at one point in your life (if not frequently) used a payment processing terminal. You know when you pay for something at the store you may have to insert your credit card into a terminal or tap it? This is a payment processing terminal and it’s one of the first things your merchant services provider may offer as it’s so popular.
What can a Payment Processing Terminal do?
If you own a local retail store or a physical store that accepts credit cards or debit cards, then you might need a payment processing terminal to help you start the process of processing payments.
Payment processing terminals are powerful here’s what they can do:
- Accept multiple payment methods from tap-based payments to credit and debit cards
- Can be faster than point of sale systems
- Multiple connection sources from ethernet to telephone
- Easier to use and operate over other solutions
As you might have recalled, we said you MIGHT need a payment processing terminal. What does MIGHT mean? Well, read on and in the next section you’ll learn about the next most popular payment service that a merchant services provider might offer: a point of sales system.
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Point of Sale Systems
Next, we will cover another hot topic in the realm of merchant services: POS (Point of Sale) systems.
What is a Point of Sales System?
A point of sales system or POS for short is a physical terminal at your retail location that acts as your own personal inventory management solution and payment processor. A point of sale system typically looks like a computer that’s a touch screen and either has a payment processing terminal built directly into the unit or has one attached to it.
You may recognize a few of these popular POS by their names alone:
Point of sale systems unlike credit card processors don’t need to be static in one place, you might have gone to a restaurant where your waiter or waitress took your order directly onto a tablet and even processed your payment through there. This is another form of a point of sales system that a merchant services provider may offer.
What can a Point of Sales System Do?
Point of sale systems vary depending on the business or merchant account service provider you go with but most commonly you can expect a generic POS that is a standalone computer unit with a touchscreen display for quick entry.
But what exactly can a standard point of sale system do?
- Manage inventory
- Accept credit card, debit card, Apple Pay, Google Pay or cash payments
- Manage inventory pricing
- Manage promotions
- Time management solutions
- Tip management
- End of day settlements (without needing to visit any website or calling your provider)
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Merchant Services Terminology
We’ve covered a lot of the services that merchant service providers offer but there is still more to learn and understand. In this section we’ll explain some of the common terminology and what they mean and what they do.
Approved transactions are transactions that are clearable from your customers account into your payment processor and then onto the settlement process.
A payment settlement is when a transaction has been approved the issuing bank releases the funds from the customers account to the payment processor who then releases the funds into your merchant account.
Settlements are typically done manually at the end of a business day to calculate profits but there are several solutions to automate the process through your merchant services provider.
An authorization hold can mean a variety of things but most commonly it is one of the following:
- Customer doesn’t have the funds required to meet the price
- Customers bank might have a limit on transaction amount for that period of time
- Your merchant services company flags a fraudulent transaction for your manual review
- You chose to delay the settlement process and add a manual hold to an authorization
Some gas stations may frequently place another type of authorization in the method of placing a small fee onto your transaction (which is later refunded).
If you check your personal bank account and look at your recent transactions, do you see any that are pending? If they are pending you might have an authorization hold or the merchant has yet to start the settlement process.
Payment Card Industry Data Standard (PCI)
You may have heard about the phrase PCI compliance and PCI in general but it’s actually deeper than most know.
PCI is the security standard that’s enforced by a lot of card brands such as AMEX, Visa or MasterCard. The technology behind PCI requires businesses to be secure for the entirety of the payment process. If you are not PCI compliant certain card types might not function correctly.
A huge benefit of having a merchant services provider at your side is the help to ensure that you are PCI compliant from the inside out.
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