If you're a small business owner, you know that accepting credit and debit cards is essential to keeping your customers happy and your business running smoothly. But what you might not know is that there's a lot more to merchant services than simply being able to process payments.
In this guide, we'll cover everything you need to know about small business merchant services, from the basics of credit card processing to more advanced features like fraud prevention and data security. By the time you're finished reading, you'll be an expert on everything merchant services-related, and you'll be able to make informed decisions about which provider and which services are right for your business.
So let's get started!
What are merchant services?
Put simply, merchant services are the credit and debit card processing solutions that businesses use to accept payments. This can include everything from in-person credit card readers to online payment processors and mobile apps.
In order to accept credit and debit cards, businesses need to partner with a merchant services provider. These providers are typically banks or financial institutions, but there are also a number of independent merchant services providers that offer competitive rates and features.
When you partner with a merchant services provider, you'll be given access to their payment processing platform. This is the software that allows you to accept credit and debit card payments, and it usually comes in the form of a physical credit card reader, an online payment gateway, or a mobile app.
There are a few different types of merchant services providers, and the one you choose will depend on your business's needs. The most common type of provider is an acquiring bank, which is a financial institution that partners with businesses to provide them with credit and debit card processing services.
Another type of provider is an independent sales organization (ISO). ISOs are typically third-party companies that act as middlemen between businesses and acquiring banks. They often have their own payment processing platforms, which they then offer to businesses at a markup.
Finally, there are payment service providers (PSPs). PSPs are similar to ISOs, but they typically don't have their own payment processing platforms. Instead, they partner with multiple acquiring banks and ISOs to offer businesses a variety of different debit and credit card processing options.
What do merchant services include?
Merchant services can include a wide range of features, but the most essential feature is the ability to process credit and debit card payments. Beyond that, there are a number of other features that can be included in merchant services packages, such as:
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Payment gateway: A payment gateway is a software platform that allows businesses to accept online payments. It typically includes a shopping cart, an online payment form, and a secure connection to the merchant services provider's payment processing platform.
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Mobile credit card reader: A mobile credit card reader is a physical device that allows businesses to accept credit and debit card payments on their smartphones or tablets. Mobile readers usually connect to the merchant services provider's payment processing platform via Bluetooth or a similar wireless connection.
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Fraud prevention: Fraud prevention features help businesses avoid fraudulent chargebacks and other types of fraud. These features can include things like AVS (address verification system) and CVV (card verification value) checks, as well as more advanced features like 3-D Secure.
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Data security: Data security features help businesses keep customer data safe from cyber criminals. These features can include things like PCI compliance and tokenization.
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Customer management: Customer management features help businesses keep track of their customers and their purchase histories. These features can be useful for things like targeted marketing and loyalty programs.
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Reporting and analytics: Reporting and analytics features provide businesses with insights into their sales, customers, and more. These features can help businesses make better decisions about things like pricing, product offerings, and marketing campaigns.
What are the benefits of merchant services?
There are a number of benefits that come with using merchant services, including:
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Convenience: Merchant services make it easy for businesses to accept credit and debit card payments, both in-person and online. This can make it more convenient for customers to make purchases, and it can also help businesses increase sales.
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Security: Merchant services providers typically offer a number of data security features, which can help businesses keep customer data safe from cyber criminals.
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Flexibility: Merchant services packages are usually customizable, which means businesses can choose the features that are right for them. This can help businesses save money by only paying for the features they need.
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Scalability: Merchant services providers typically offer a variety of plans, which means businesses can scale their services up or down as their needs change. This can be helpful for businesses that are growing or experiencing seasonal fluctuations in sales.
What are the costs of merchant services?
The cost of merchant services can vary depending on a number of factors, such as the type of business, the size of the business, and the features included in the merchant services package. However, there are typically three main components to the cost of merchant services:
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Transaction fees: Transaction fees are charged every time a customer makes a purchase using a credit or debit card. These fees can vary depending on the type of card used, but they typically range from 1% to 3% of the total purchase price.
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Monthly fees: Monthly fees are typically charged by merchant services providers in order to cover the costs of things like customer support and fraud prevention. These fees can vary depending on the provider, but they typically range from $10 to $30 per month.
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Equipment costs: Equipment costs can vary depending on the type of equipment needed, but they typically range from $50 to $500. This cost is usually one-time only, unless the equipment needs to be replaced or upgraded.
How do I choose a merchant services provider?
When choosing a merchant services provider, there are a few things you should keep in mind, including:
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Cost: Make sure to compare the costs of different merchant services providers before making a decision. You should also make sure to read the fine print so you know what all of the fees are and what they cover.
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Features: Make sure to compare the features offered by different merchant services providers to make sure you're getting the ones that are right for your business. You should also make sure to find out if there are any additional costs for features like data security or customer management.
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Reputation: Make sure to research the reputation of different merchant services providers before making a decision. You can do this by reading online reviews and speaking to other businesses that have used the provider's services.
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Customer support: Make sure to find out what kind of customer support is offered by the merchant services provider. This is important in case you have any questions or problems with your account.
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Contract terms: Make sure to read the contract terms of different merchant services providers before signing up. You should pay attention to things like early termination fees and automatic renewal clauses.
Now that you know more about merchant services, you can decide if they're right for your business. If you do decide to use merchant services, make sure to compare the costs and features of different providers before making a decision.
