When you run a business setting up payments can be a complex process. Thanks to merchant services, however, doing it becomes much easier. Merchant services save you the hassle of cashing out checks, handling cash transactions, or processing bank transfers. Niccolo Marketing established a company called Fluyt that offers merchant services to small business. The aim of this guide is to explain what merchant services are and how they work.
What are merchant services?
Merchant services is a term that describes a range of financial services that allow businesses to process electronic and card payments. Merchant services support businesses with developing software and provide hardware needed to accept customers’ payments.
There are a number of services that fall under the term of merchant services. You can find an overview of them in the table below.
| Service | Description |
| Credit card terminals | credit card terminals are also known as a card readersthey are an example of hardware that merchant services providers supplythey require an internet connection |
| Virtual terminal | necessary for businesses that accept credit and debit card transactions onlineare a form of virtual card readers |
| Payment gateway | it’s a software that sends information about a purchase each time a customer makes a transactioncan include advanced features like fraud prevention or address verification |
| Payment processor | serve to authenticate and make the transaction securesend the payment information to yours and customer’s banks |
| Merchant accounts | represent a type of bank account that allows you to accept card paymentsafter the payment has been received it will go to this account first before it is transferred to your business’s bank account |
| Check services | a system that can process not only cash and digital transaction but also payments done via checks |
| Loyalty programs | if your business offers rewards to regular customers you can connect the payment processor to the loyalty scheme |
How do merchant services work?
To understand how merchant services work it is important to know how credit card transactions are being processed. That can be explained in a few steps:
- The customer buys something and uses a credit card terminal or a virtual terminal to pay.
- The terminal sends data to the payment gateway.
- The payment information is sent to the payment processor, which requests authorisation to confirm the payment.
- The transaction data is passed onto the card network.
- The card network transfers the information to the customer’s bank.
- If the customer has enough money in their account, a response is sent to the card reader and the transaction is completed.
- The payment is sent to the merchant account and later the funds are transferred to your business’s bank account.
How to choose a merchant services provider
There are a number of companies that offer merchant services available. Each of them offers different payment services. It is important to compare their offers before choosing one to make sure that the company matches your business’s needs. A few important aspects to consider include:
- Cost – you should take into consideration upfront costs, as well as the ongoing monthly services. Some merchant services providers offer flat rate payments, while others give businesses’ the option to pay fluctuating payment processing fees.
- Customer service – having access to the help of the support team is very important in case you have any problems or queries. Customer service can include live chats, designated phone lines or special email addresses. Before you choose a provider, make sure to read reviews left by others who used their services.
- Payment processing times – some payment processors will take longer to process payments than others. If receiving payments quickly is important for you, you should always look at what the average payment processing time of a certain provider is.
- Integration – it is important that merchant services, software and hardware are combined effectively and work well together.
How much do merchant services cost?
The fees associated with merchant services vary depending on the provider and the services you chose. They can include a number of things, for example:
- An upfront fee for setting up the merchant account
- Fees for each processed transaction
- A monthly charge for the services
- A payment gateway fee
- A fee for operating the card reader
- A statement fee
Not all merchant services will include all these things. Moreover, some providers are more pricey than others. That is why it is crucial to take into consideration all types of costs, including the hidden ones. When choosing a merchant services provider you should pick the one that offers not only the cheapest rates but also the most flexible and convenient payment options.
How merchant services are useful for your business
In addition to the basic role of allowing you to process credit card payments, merchant services bring a number of additional advantages for your business. You can find an overview of these benefits in the table below.
| advantage | description |
| Bigger customer base | If your business accepts card transactions, the number of people using your services will be greater than if you only take cash payments. |
| Effective financial management | Merchant services facilitate updating and storing transaction information. They also integrate all payment channels. |
| Expanding your services | Thanks to offering more payment methods, you can deliver more services both in-person and on online platforms. |
| Saving money | Merchant services make it easier for you to manage your finances. Moreover, if you choose one provider you will not have to pay different transaction fees for each operation you perform. |
Are merchant services safe?
Payment security is a big concern of all business owners. Merchant services providers are concerned with the safety of their customers and have security technologies in place that will notify both the merchant and the customer in case of attempted fraud. Moreover, any suspicious transactions will be blocked. That said, merchant services are completely secure for all parties involved.