Process Fast, Secure Payments Using Merchant Service Providers
Are you opening a retail store in a brick-and-mortar establishment? Creating an online storefront? Customers who visit you in person or online will likely pay electronically via a debit card, credit card contactless pay or mobile device. How can your retail store capture this cardholder data and turn it into a quick and secure payment?
Merchant service providers can help you manage payment card transactions and accept multiple payment methods. They offer the products and systems your business needs to streamline card payment processing. As a result, you’ll increase your revenue, strengthen customer loyalty and grow your business.
What Are Merchant Services?
Merchants need reliable services and equipment to accept and process customer payments through credit cards, debit cards and other electronic payment methods. Merchant services operate through a merchant account that the merchant sets up and may be able to integrate with their existing software.
These tools are essential because they help you accept and process payments in a way that benefits both you and your customers. Customer payments help you grow your business, so merchant services are critical for capturing more customers and income.
What Merchant Services and Products Does Your Business Need?
Some examples of merchant services and products include:
- Payment gateways: Payment gateway software works with the merchant’s website or e-commerce store to take and process online card payments. The payment gateway functions as a digital credit card terminal.
- Virtual terminals: Virtual terminals are software applications merchants can use to accept card payments when the physical card is not present.
- Credit card terminals: Credit card terminals (or electronic data capture terminals) allow merchants to accept in-person card payments. The customer can swipe, insert or tap their card to pay.
- E-commerce platforms and services: E-commerce software sets up and operates online stores so customers can buy products online. E-commerce merchant services support payment card transactions in the online store.
- Point-of-sale systems: The point-of-sale (POS) system is the equipment that takes customer payments for a merchant’s products or services. POS transactions occur when the customer pays in a physical store.
- Mobile payments: Mobile payments allow customers to pay for a product or service via portable electronic devices like tablets and cell phones. This service also includes sending money to individuals through applications like PayPal and Venmo.
- Contactless payments: Contactless payments use near-field communication or radio-frequency identification to make secure transactions. Payment options include Apple Pay, Google Pay, Fitbit Pay, Android Pay, credit and debit cards, and similar devices.
- Business management software and applications: Business management tools manage orders, inventory, customers, employees and other business aspects.
What Is a Merchant Service Provider?
A merchant service provider is the third party serving as the go-between for your business, your customers’ payment card providers and your customers by offering different types of merchant products. Each merchant service provider offers specific equipment and services for electronic transactions. Examples of merchant service providers include:
- POS system manufacturers
- Payment gateway providers
- Independent sales organizations
- Credit card companies
Merchant service providers have three primary purposes:
- Manage and process card payments
- Secure cardholder data
- Provide the technology and tools to collect card payments
Some merchant service providers offer more services to improve transactions, such as managing gift cards and loyalty programs and supporting business operations through inventory management and report generation.
The main purpose of a merchant service provider is to manage cardholder data and process payments. They will:
- Gather payment card and transaction information
- Receive authorization or denial to complete the transaction
- Collect the funds from the bank or institution that issued the payment card
- Send you the money after charging the interchange fee and other fees
Payment security from a merchant service provider protects the data from credit card transactions, online payments and cardholder data storage. As a result, your customers and business can make safe and secure transactions.
Merchant service providers also assist your company in complying with the standards and regulations of the payment card industry (PCI). Compliance ensures your cardholder data stays secure through proactive security measures to prevent lost data. Payment security can include methods like tokenization and encryption.
Accepting card payments requires the right technology, and merchant service providers can provide it through their products and services. As the technology provider, your merchant service provider also gathers and reports data about your business’s card payments. You’ll learn valuable information, such as:
- Which customers you get the most revenue from
- The most popular times of the day, month and year for transactions
- Underperforming products and services that could be improved or removed
Every merchant service provider is different regarding the technology they offer and the fees they charge for the equipment and processing transactions.
Reasons To Have a Merchant Service Provider
With a merchant service provider, you can accept card payments while maintaining security standards to protect your business and your customers’ sensitive data. From the point of sale onward, your merchant service provider will manage the transaction data to ensure the process is smooth and secure and that you receive your payment quickly. You can trust them to process your payments while you focus on running and growing your business.
Merchant service providers offer several advantages to merchants. These companies:
- Allow merchants to provide more payment options to their customers
- Accept alternative payment methods like digital wallets and mobile pay
- Process online payments including ACH
- Simplify the payment acceptance process
- Help merchants get paid more quickly
What Is a Merchant Account?
A merchant account is a specialized bank account that helps businesses process electronic payments. Unlike a standard bank account, this account is strictly used for the business purpose of making and accepting payments. The merchant account holds funds before they are cleared to transfer to your business’s primary bank account. With a merchant account and payment gateway, you can accept card transactions from customers.
How Can a Merchant Account Benefit Your Small Business?
A merchant account provider can set your company up with everything you need to get started. This account establishes a business relationship between your company and the merchant service provider, which offers several benefits for small businesses. With a merchant account, your company can:
- Accept card payments, simplifying the buying process and attracting new customers
- Increase sales—and business growth—by allowing more transaction types
- Make purchasing convenient for customers by enabling them to pay their preferred way
- Improve cash flow forecasting and management
- Avoid the risks associated with other payment methods, like bounced checks
- Set up recurring payments for regular services
In addition to card transaction processing, merchant account providers offer several other services, such as technology integrations and business services. To maintain a merchant account, your business may have to pay a fee to cover the transaction costs from payment processors, the issuing bank and the credit card association.
Fees and Costs Associated with Merchant Services and Providers
Like many other business services, using merchant services to accept card payments comes with some fees. It’s critical to understand what these fees are for to ensure these services are helping your business instead of draining your revenue.
Merchant service fees can be structured as a per-transaction rate or a monthly or annual service fee. The service provider charges fees for card payments because the issuing and acquiring banks take on the financial liability of the transaction. If the customer is late with their credit card bill—or doesn’t ever pay—the issuing bank will be out of that payment. Banks typically assume the burden for fraudulent transactions.
The fees you will be charged depend on factors like:
- The type of business you have according to the merchant category code
- Your company’s credit rating and history
- Whether the card was present (for retail in person) or not present (e.g., over the phone, internet or mail order)
- How risky your business is
- Card swipes versus key-entered card numbers
The most common pricing models merchant service providers charge are:
- Flat rate: With a flat-rate fee, the merchant service provider charges a fixed fee for all card transactions, regardless of the card used. This rate can be structured as a base rate or a base rate with a per-transaction fee.
- Tiered rate: Tiered processors charge a fee based on the card type, the risk the transaction carries and the transaction volume for your business.
- Direct interchange pricing: With a direct interchange fee, the merchant service provider charges a monthly fee not based on a percentage.
- Interchange-plus pricing: In the most common pricing model, you, the merchant, are charged the interchange rate when a customer uses a payment card. This rate is calculated as a percentage of the transaction amount. You will also pay a fixed per-transaction fee.
Each of these pricing models has its caveats, such as:
- Inconvenient for small businesses: Direct interchange fees and tiered rates are challenging for small- and medium-sized businesses (SMBs) with low sales volumes (whereas a flat rate system is ideal)
- Cut taken from sales: The interchange plus rate varies by the credit card issuer, and the processor takes a portion of each sale.
- Not ideal for business-to-customer transactions: Since tiered rates fluctuate, they may not be suitable for business-to-customer transaction processing.
Some other fees a merchant service provider may charge include:
- Account setup fees
- Minimum processing fees
- Early termination fees
- Nonsufficient funds fees (NSF)
- Chargeback fees
- Account fees
- Statement fees
- Cancellation fees
What To Consider When Choosing a Merchant Service Provider
Your transaction revenue supports your business, so you need a merchant service provider to help you grow your company. Asking these questions will help you select the right one:
- Do their offerings match my business needs? Since each merchant service provider has different offerings, choose one that best aligns with your business needs and goals, now and in the future.
- Which payment options do they support? Offering a variety of payment options improves the customer experience. See whether the merchant service provider supports payment processing solutions like mobile payments, contactless payments and ACH.
- What fees and costs do they charge? Ask the merchant service provider about their pricing model to decide whether your budget is compatible. Understanding what your company pays for merchant services will help you partner with a cost-effective provider.
- What customer support do they offer? Technical difficulties are likely to happen at some point. A knowledgeable customer support team helps you troubleshoot them as quickly as possible. Identify the level of support included in the contract and whether you will need to pay additional support costs.
- What protection do they provide? Your business should be protected from payment security issues like credit card fraud. Ask the merchant provider if their systems support PCI compliance and what insurance they offer to cover security issues.
- Do they have other services? Some providers offer additional services like loyalty programs, employee management solutions and cash advances. Find out whether your merchant service provider offers these services, and consider whether they will benefit your business now or in the future.
Choose CSG Forte as Your Merchant Service Provider
Now that you know what to look for in a merchant service provider, look no further for the ideal one—CSG Forte. For over 20 years, we’ve been offering industry-leading payment solutions that can help you accept payments quickly and grow your business.
We partner with several software providers to enable secure and quick payment processing for all merchants. Our solutions scale with your company to meet your changing needs while simplifying the payment process. With our payments platform, you’ll do more than just accept card transactions and ACH payments. You’ll manage every facet of these transactions with ease, from reconciling funds to running reports.