To receive payment from your customers as a small business owner, to receive payment from its customers. However, completing these processes individually can be expensive, time-consuming, and exposed to fraud. How then are small business owners to run their businesses and conveniently receive non-cash payments from their customers?

What is a Merchant Service?

Merchant service is a solution designed to facilitate financial services processing within a business. They are a broad range of services that help merchants process payments from their customers via different (mostly non-cash) channels. Specifically, merchant services facilitate payments via credit and debit cards, online and keyed-in methods, eCommerce payment gateways, and virtual terminals.

Who is a Merchant Services Provider?

Merchant services providers are tools, software, systems, and companies that render merchant services to small and large businesses. These providers also render customer support to business owners for the smooth running of their businesses.

Types of Merchant Services for Small Businesses

There are several merchant services small businesses can benefit from a provider. These services help them receive payment for their products and services conveniently and securely. They include:

Payment Processing

Merchant services are often interchanged with payment processing. But this is not an error because many merchant services rendered to small businesses include processing payments from customers’ accounts to business accounts.

In general, merchant services providers act as intermediaries, linking small businesses with their customers’ financial institutions for faster payments. This process involves processing customers’ financial information and interacting with customer banks before transferring funds to merchant accounts.

The following are various payment processing services rendered by merchant service providers:

Card Transactions

It is evident that most consumers prefer card transactions, so they barely go around with cash. If you run a small business, you’ll need a merchant service provider to be able to receive card payments from your customers. This service is usually completed using a card terminal, card reader, or POS system. Most merchant service providers often provide these platforms for card transactions. You only need to pay the corresponding fee and have the hardware set up for your business to benefit from card transactions.

By swiping, taping, or dipping your customers’ cards into the merchant service hardware, you can securely gather the customers’ financial data and withdraw funds from their accounts into your merchant account. In a nutshell, this service ensures that you secure the payment for each transaction before rendering your services to customers.

Payment Gateways

A payment gateway is an online technology that facilitates the exchange of information and funds between your business and your customer’s financial institution. For example, suppose you run an online business or an eCommerce platform. In that case, this merchant service allows you to receive payments via an online payment portal. As soon as your customers are done shopping from your store, they proceed to your payment page. From the financial information (usually debit or credit card information) they key into this page, your merchant service provider processes the payment on your behalf.

Before considering a merchant service provider, you must know what your business needs

In their payment gateway features, most merchant service providers include invoice processing, automatic billing, and recurring billing.

Point of Sale

Merchant services providers help small businesses set up point-of-sale systems for on-site payment transactions. This service is useful for retail businesses with large processing volumes and in-person payment systems.

Some POS services come with inventory management, reporting, and CRM features. At the same time, others like Clover come with loyalty programs and offline payments to help businesses secure their funds, even with connection problems.

Hardware and Business Resources

To receive card payments from your customers, you’ll need devices to be able to read financial data from each card. Small business merchant service providers also provide the hardware required to access financial details from customers’ cards.

While most providers allow the flexibility of third-party hardware and equipment, others include hardware in the entire service package. Whichever you opt for, you must ensure that your hardware of choice is compatible with the services rendered by your provider.

Merchant service providers also provide tools and programs that allow you to integrate your payment processing with other business solutions you use. This integration further ensures the smooth running of your business.

Mobile Payments

Merchant services also provide a platform to receive mobile payments. These payments are completed using phones and tablets, and they cover a large percentage of the payment methods adopted in developed countries today.

Process and Funds Security

In addition to processing payments and business transactions, merchant services providers provide data and funds security for small businesses and their customers. The provider ensures that your customer has sufficient balance in their bank accounts to fund the transaction in question and will notify you whether or not the funds are available.

Furthermore, most merchant service platforms are PCI compliant. As a result, their systems are heavily secured, so stored and processed financial data are not compromised. This security is accomplished by the tokenization of card details and pins. 

Merchant Account Support

Merchant service providers also provide business support to your business. For example, in the case of a customer rejecting a payment transaction you initiated on their account, the merchant service provider ensures that the customer’s funds are returned upon approval. This process is known as chargeback and may be chaotic or impossible if these providers were absent.

Some merchant service providers also render virtual and in-person support to small businesses as part of their service packages. In most cases, in-person supports usually come at a cost to you as the business owner, while remote or online support is usually included in the entire package. Some services also make useful business articles, videos, and other resources available to businesses who visit their websites.

How to Choose the Best Merchant Service

Having listed the features you should typically look out for in merchant service platforms. Opting for the first merchant service you find on the internet will not suffice. There are factors you must consider to choose the best merchant service for your business.

Type of Services Rendered

Before considering a merchant service provider, you must know what your business needs. In turn, this knowledge will enable you to narrow your search for merchant services that meet the specific needs of your business. 

For instance, if you run an online store without a physical store, you should be on the lookout for merchant service providers that render payment gateways and payment portal services. On the other hand, if you have both an online and physical store, you’d need a merchant service provider with in-person and online payment features.

It is also important to look for a service provider who renders industry-specific merchant services to small businesses. Clover, for one, tweaked its services to suit food and beverage, retail, and service businesses. So, should you opt for providers like this, you’ll get highly customized merchant services for your business.

Pricing Structure

Suppose you do not intend to exhaust your business profit on funding payment processing. In that case, you must also consider the pricing structure of your prospective provider. Some providers adopt flexible pricing structures with multiple plans that can accommodate the financial strength of different businesses. On the other hand, some other providers have only a single plan and may not be favorable for you, especially when you do not need all the features of a merchant service.

It is also important to look for a service provider who renders industry-specific merchant services to small businesses.

Suppose you only process low transaction volumes as a small business owner. In that case, you’d want to opt for a service provider that offers flat-rate plans. But if your volumes are quite high, interchange plus would be a more favorable option.

Service Fees

In addition to the cost of processing each transaction, merchant account providers also charge extra fees for hosting and maintaining merchant accounts for small businesses. Some providers sum up most of their non-transaction fees as a flat monthly fee, while others allow you to pay differently. These fees include:

  • Setup Costs
  • Minimum volume fee
  • Maintenance fee
  • Early termination fee
  • PCI Compliance fee

Ensure that you inquire and clearly understand what a service provider would charge your business before opting for their service.

Duration of Existence

You put your business reputation on the line when you grant merchant service providers access to your customer’s financial details. Hence, it is vital to check the reputation of a merchant provider before opting for their service. For example, how long have they been in operation? How are they doing with their current clients?

An ideal way to choose the best merchant service provider is to go through user reviews. Go to reputable review sites, and hear what other software users have to say about its functionality.

PCI Compliance

In 2018, card payment fraud accounted for a global loss of $24.26 billion and was the third-largest fraud scheme in the United States. As a result, your choice of merchant service platform must be PCI compliant to guarantee that your payment processes are securely completed.

Automation and Integration

If you process a high volume of transactions, you’d need a service provider that can reduce your workload within the shortest period possible. A good place to start is to look for solutions that allow you to automate a number of your payment processes. Also, look for software with a wide array of integrations to allow you one-click access to other software you use for your day-to-day operations. Our top-rated merchant service providers like ProMerchant and Clover support integration with popular accounting software like QuickBooks.

Customer Support

As a merchant, customer support is something you wouldn’t want to gamble with because the distortion of a single process in your services can cause a lot of damage. While most providers offer virtual or bot-assisted support, a handful of others provide one-on-one in-person support to their users. As an example, ProMerchant provides each business with a dedicated Account Director who renders premium support services to the business.

Contract Duration

Most of our top merchant providers like Leaders, Merchant Services, Clover, and PaymentCloud do not tie business owners in long, exhausting contracts. It is quite important that you opt for services that will not need you to assign long-term contracts before using them, especially if your business is seasonal and will not be in operation all year round. Opt for providers who offer monthly subscription packages to get the best out of your merchant service. And should you decide to settle with contract-based merchant services, look for providers with zero early termination fees?

Hardware Requirement

Equipment and hardware requirement is also something you must consider before opting for a merchant service. This is because merchant service hardware can be quite expensive to purchase and maintain. Opt for merchant service brands like ProMerchant, which provides equipment and hardware for small businesses at no cost.

Final Word

Without merchant services, small business owners may not be able to run their processes effectively. However, choosing the wrong service may be more disastrous than not using one. Hence, you must thoroughly consider the needs and capacity of your business to choose the best merchant service.