Every business needs a way to process payments. Without one, all transactions have to be made in cash. With the majority of purchases happening online or using debit or credit cards, your business likely could not function without merchant services. Here is a deeper look at what merchant services are and how they impact businesses.
What are Merchant Services?
Merchant services are the products and services your business needs to accept payments. They make it possible for you to process credit and debit card transactions, and other forms of online payments, like online checks or ACH. Merchant services also make it possible to receive money from customers through online or mobile apps. In addition, they allow you to offer financing, gift cards, and other features that are only possible when you accept payments electronically.
In essence, merchant services handle the backend of payment processing. These services are often handled by banks or third-party companies that have the machines and resources needed to securely accept payments.
Why Do You Need a Merchant Services Provider?
Merchant services are critical for any business that accepts payments. A merchant services provider does the leg work so you can run your business. It is responsible for the technology that processes payments, the security that protects both your customers and your business, and the compliance that ensures your business remains compliant with regulations.
It is actually a complicated process to process payments. There are several steps that need to be followed for every transaction so that they can be logged in your system and with a financial institution, submit a request for funds from the rigth bank accounts, and ensure that the money is available and transferred. All of this is done within seconds for each transaction.
Even if you had the hardware, like cash registers, to handle transactions, you would not be able to without a payment processor.
If you accept payments, you need a merchant services provider. It is about more than just processing payments. It is also about protecting your company and your customers. Card transactions have a high risk from cybercriminals and counterfiters. Your merchant services provider works hard to protect transactions.
Without this level of protection, your company would assume liability for anything that happened. If a customer’s credit card information was stolen during a transaction and used for credit card fraud, you may be held liable. Merchant services companies not only stop this from happening, but they have the resources to handle this kind of liability when problems do arise.
How Do Merchant Services Work?
When a customer pays with a credit card or debit card, or uses another form of payment, they provide their information to the merchant services provider.
Both parties use an encryption technology called Secure Sockets Layer (SSL). This makes sure the information is private and protected. SSL is the same technology that prevents hackers from stealing your information on websites.
The merchant services provider then provides your company with the necessary information to complete the transaction. This includes the customer’s name and billing address. It also includes their credit or debit card information.
Throughout the transaction, the steps to the process are separated between several people and systems. This separation makes it harder for any one person to take all of the information for themselves.
For example, The customer puts the card directly into the system and enters a pin number. The cashier never sees it and can’t steal it. That information is encrypted and sent to an automated system that verifies it and processes the transaction between banks. Once completed, it sends a confirmation message back to the cashier and the customer to let them know that the transaction is complete.
Throughout this process, only the customer has access to their banking information. Even the merchant services provider does not have access to it since the system is automated. These multiple layers of security make transactions much more secure than a company handling it all themselves.
Who Offers Merchant Services?
Merchant services providers are banks and financial institutions. They have the necessary licensing and compliance to handle payments. In addition, they have the technology and staff to process transactions reliably and securely. Here are some of the most popular merchant service providers.
First Data is one of the world’s first merchant service providers. It has been in business for more than 40 years. First Data has more than $20 billion in annual revenue and $100 billion in assets. It operates in more than 100 countries and has more than 33,000 employees.
Adyen is a Dutch company that was founded in 2006. It has become one of the biggest payments providers in Europe. In the last two years, it has expanded to the United States and Asia Pacific.
PayPal is one of the biggest and best-known payments providers. It is one of the leading payment methods for online businesses. It allows customers to pay with a variety of methods, including debit and credit cards, mobile wallets, and PayPal.
Stripe is a payments provider founded in 2010. It started as a service for developers who wanted to build apps and accept payments. Stripe has become one of the largest and most popular payment providers.
Why Are There So Many Providers to Choose From?
There is a large number of merchant services providers because there is a massive market for processing transactions. Every business has numerous transactions per day and the provider earns a fee per transaction. This means that even at a small percentage or fee per transaction, providers can make a lot of money by processing at scale.
Tips for Choosing a Merchant Service Provider
Although there are a lot of merchant service providers providing similar services, they are not the same. Some are better than others for a variety of reasons, and it is important to make sure that your provider matches your business. Here are a few things to look for when trying to choose a merchant service provider.
The most important thing to consider is the service you receive as a customer.
- Does it meet your needs?
- Do you like the people you work with?
- How fast do they respond to your questions?
You will be signing a long-term contract, so you’ll want to be with a service that you like and gets the job done.
Your provider should be using the latest technology. While most providers are up-to-date, it is something to consider. Newer technology can offer better security, faster processing times, and more functionality.
Consider the pricing of the merchant services you are considering. There are several pricing structures that they generally use.
Many providers charge a percentage of each transaction as a fee for the service. In other cases, they charge a flat fee per transaction. Which one you choose depends on your company. If you are making a lot of transactions for relatively low or medium values each, then charging a percentage is a better option. If you complete fewer transactions overall but for larger amounts, a fixed rate may be your best option.
Security is one of the primary reasons why you use a merchant services provider. Choose a company with a strong safety record and a relatively low chance of having data breaches or other cybersecurity issues. Using updated technologies is only one part of the security focus. The company needs to have strong policies in place and experience dealing with the problems that can arise.
Fee-Based or Commission-Based? Which is Better for Your Business?
Perhaps the most important feature that you will investigate is the price per transaction. How the company charges fees will determine if a service is right for you based on your budget.
Fee-based providers charge a flat rate for their services, meaning you’ll know exactly how much you’ll pay each month. Commission-based providers charge per transaction, meaning their fees will vary depending on how many purchases your business processes. Providers can also charge a percentage of the transaction as a fee.
Merchant services are a necessity for any business that accepts payments. While each provider will likely have different rates and fees, the most important thing is to choose a merchant services provider who is reliable, has good customer service, and offers the technology that is best for your business. This will enable you to accept credit, debit, and other forms of electronic payment and make it possible for your customers to pay you electronically.
There are many services that your business can use to provide better service to customers. An answering service is a good investment as it gives you phone coverage whenever your staff is not available. That way, your customers are never left waiting for answers without talking to anyone.
If you’re ready to get started with a professional answering service, we’re here to help. Contact Answer Aide by calling (866) 427-3500 or by filling out our online form. We’re happy to partner with you to support your business while it grows.