What is a Merchant Service Provider?

July 9, 2023

Merchant service providers help facilitate electronic payments between merchants and their customers. There are hundreds of competing merchant services out there so it’s important to know how to find the right one.

How to Navigate Merchant Services

A merchant service provider is a middleman between the consumer’s banks and the merchant’s banks. They can also transfer funds between the merchant account and the customer accounts. Merchant services are also known as credit card processing. These services take care of electronic payments for businesses. The activities of merchant processing providers include the following:

business owner working from computer

  • Obtaining sales information from the merchant
  • Receiving authorization for the transaction
  • Collecting funds from the bank which issued the credit card
  • Sending a payment to the merchant

Why is this important? Back in the day, retailers used to extend a line of credit to their consumers. Instead of charging them right away, they would write down their name in their little black book.

After that, the merchant would collect their debt from the consumer later on. But here’s the catch. This transaction was based on a relationship-driven model based on trust. As technology and modern commerce has evolved, so have merchant services to reflect the change.

How Does Credit Card Processing Work?

Merchants rely on credit card processing to get the funds they have earned delivered to their bank account. Credit card processing works through a variety of relationships. The most important ones being between the merchant service providers account and the bank. The processor itself also works with the bank and credit card companies of customers in order to receive the funds. 

When a consumer purchases goods from a merchant with a credit card, the credit card processor has begun. Swiping the card at the clerk’s point-of-sale device or terminal gives the payment processor your information. In an online sale, buyers’ payment information is manually inputted. 

Then, the point-of-sale device gathers information from the consumer’s credit card, inputting the transaction amount into a system as well. What happens next is crazy. The customer’s credit card info transmits to the merchant’s bank via:

  • Standard terminal
  • Internet protocol terminal
  • Processing software
  • Payment processing gateway

A standard terminal sends the customer’s information through a standardized phone line to connect the funds to the merchant’s bank. On the other hand, internet protocol terminals are used to send the sales authorization request to the merchant’s bank through a wi-fi connection. Of course, this is all done through a safe and secure terminal. Similar to internet protocol terminals, processing software 

uses wi-fi connections to send funds to the merchant’s bank via special computer software. In this case, a regular terminal is not needed. Lastly, payment processing gateways are used to submit a sales authorization request to a particular website. After that, the customer’s financial information is sent to the merchant’s bank. Once final approval is made, the funds from the customer’s bank are released. The money is then transmitted into the merchant account.

How Do I Choose a Merchant Service Provider?

Finding the perfect merchant service provider can make all the difference for a high risk merchant. First of all, you’ve got to find one with a clean track record. Try taking a look at the merchant’s Better Business Bureau report. Plus, you can also talk to other small business owners about who they work with in terms of handling their transactions too.

female merchant in warehouse taking inventoryThere’s nothing better than going with the recommended merchant service provider from someone you can trust. Take a look at what their customer support options are as well. For instance, do they offer a customer service number for people to call at all times? If not, find out what their hours are. Another word of advice is to check if their rates are reasonable. Beware of merchant processors that advertise rates that are lower than what everyone else is selling. They’ll most likely increase their prices after a little bit of time, or may have hidden fees.

Also, be sure to think about what your business needs explicitly. For example, does the merchant service provider even have the kind of processing that you need? Think about the long run, particularly if you’d like to expand or diversify in the coming years. Lastly, check your monthly processing volumes to make sure that you will not exceed them.

Tips For Choosing a Merchant Service Provider

Need more tips for choosing the perfect merchant service provider for your company? Look no further. After you’ve made sure that you haven’t capped your monthly processing volumes, there are a few more things to think about when choosing a merchant service providers, including:

  • How fast they deposit proceeds into your company’s bank account 
  • The ability to send reports online
  • The quality of training given to your staff and yourself 
  • The amount of time that they’ve been in business
  • Their technological competence

Also, the merchant service provider of your choice should have low cost, secure processing methods. As if that’s not enough, being a payment card industry–compliant in data security and technology should be a no-brainer.

Another great sign to look out for is that they offer the best services and products. Plus, offering American-based, free customer service hotlines that are available around the clock should be a must for any small business owner.

Questions to Ask Your Providerwoman making an online purchase

For those of you who aren’t sure what exactly what to ask your merchant service provider, we’ve got you covered. To get started, try to ask them about their quotes and estimates. It’s not a good idea to just accept whatever payment processing compay your bank recommends.

Besides this, reading the fine print is essential for getting the best rate. Instead of comparing prices on an offer in choosing the cheapest one, there might be a couple of other aspects to think about that will cost you more in the future. Make sure that you ask the merchant service provider about any hidden fees upfront.

Trust PayKings to Establish Your Merchant Services!

PayKings can get you the merchant services your business needs. At PayKings, we can help you choose the right merchant service provider. With the right merchant account, your business will thrive and get the most out of our services. In as little as 48 hours, PayKings can present you with a number of merchant accounts to choose from. Additionally, we provide the most competitive rates without compromising quality or security. Contact PayKings today to get started!

July 9, 2023 | Merchants | Guest Post