Merchant services are one of the more complex aspects of eCommerce to understand. Finding the right provider for your business and one that supports your scalability options is a long process. However, finding the right provider with the best security, software and services are essential to your business success.

Merchant services is a term that encompasses the processes that give businesses the technical means to accept payments from customers. Rapid innovations in merchant processing services mean that there is a variety of things that providers offer, and they are all different.

The Minimum

Each merchant service provider’s offerings should be at least one of these merchant process solutions:

Merchant Accounts

Merchant accounts are separate bank accounts that front businesses portions of the revenues from card transactions. The merchant acquiring bank, which is the bank where you have your business bank account, works in conjunction with whichever company you have your merchant account with to make sure you receive the funds from card transactions.

When payment for a good or service is made with a card:

  • the card processor sends the transaction information to the business’ merchant account
  • the merchant account provider then contacts the card processor
  • the card processor contacts the card issuer
  • after confirming fund availability, the card issuer then contacts the card processor who then contacts the merchant account with approval

All of these communications – called interchange – are overseen by the card networks, such as Visa and Mastercard. This interchange happens within a matter of minutes.

After receiving approval, your merchant account then begins to settle funds and eventually fronts these funds to your business bank account, fewer fees taken by the processor, network, and issuer.

Fronting these revenues to your business before the actual funds are settled by the customer paying their credit card bill involves a risk. As such, the merchant account provider also charges a fee. Merchant accounts can be expensive, but are worth the cost to avoid the risk and wait that not having one might cost.

Payment Services

Payment services offer payment services rather than merchant accounts, however, they work in a similar way to merchant accounts. Payment service providers pool payment processing into one large merchant account for all of their customers so their customers won’t have access to an individual merchant account.

Merchant service providers that offer payment services (rather than merchant accounts) are able to offer the best merchant services rates.

If you need merchant processing services for lower transaction volumes, then the lower rates and more aggregated processes that merchant payment services providers are a more attractive option for your business.

Payment Gateways

For online merchant services, you need a payment gateway. Payment gateways are merchant services because they work much like electronic versions of credit card processors. This merchant service is a software that you can plug into your business’ eCommerce platform or website.

However, many payment gateways are not set up with the necessary merchant processing services to support your business to receive the funds from an online transaction. Unless a merchant services provider offers a payment gateway with their payment services, or a merchant account, you’ll need these additional merchant services.

The Best Merchant Service Providers Also Offer…

The best merchant service providers provide merchant processing solutions that can improve your business’s sales processes.

Some of the features you can and should expect from the best online merchant service providers include:

Online Shopping Systems

Payment gateway providers should offer online shopping systems, like exceptional checkout experiences and eCommerce platforms, for their customers. Your online merchant services can also be automatically integrated into your eCommerce setup using the right service provider.

Merchant Financing

Many merchant services providers offer merchant financing to their customers. The step to offer merchant cash advances is a natural one for most merchant service providers – this form of funding relies on access to a business’ merchant account or payment services account.

Merchant services providers have begun offering capital to customers in exchange for a future portion of the business’ card sales. If a customer takes on merchant financing, their provider intercepts a certain percentage of sales until this financing, plus any predetermined fee, is repaid.

The Verdict

There are many merchant services online that can support your business aspirations. It is important to research your business and understand regulations, fees and options before choosing a provider.