Merchant services providers are companies that provide essential services that allow businesses to operate and grow. There is a lot of hype online about merchant services and the value they can provide to your business. But new entrepreneurs may be confused by the term. Keep reading for the answer to ‘what is merchant services’ as well as more information on merchant account providers.
Who is the Merchant?
“Who is merchant services?” is a commonly asked question. This is the biggest misunderstanding of what merchant services is. The dictionary definition of a merchant is a trader or someone that buys and sells goods for profit. When it comes to the business world, a merchant is what payment processing companies call a business that uses their payment facilities to collect payments from customers. For instance, a high street clothes store is a merchant because they use a credit card machine to collect payments from clients buying clothes.
A merchant can collect payments in payments, over the phone, or through the internet. There are three main types of merchants: wholesale, retail, and e-commerce. With the rise in online businesses and affiliate marketing, the latest type of merchant is called an affiliate merchant.
So, What is Merchant Services?
Essentially, a merchant is any business that collects payments for goods or services. A merchant services provider offers payment solutions to allow merchants to collect their payments effortlessly. The products and systems offered by merchant services providers often integrate with systems that a business or merchant already has. For instance, the credit card machine should connect to the Point-of-Sale System and the accounting system e.g.QuickBooks.
Merchant services offer operational support that businesses need to operate. These may include credit card processing, electronic payment facilitation, debt collection, ensuring compliance with the Payment Card Industry Data Security Standard (PCI compliance), and payment data analysis. Some merchant service providers also provide customer service management systems, inventory control systems, and payment reporting.
How Do Merchant Services Work?
If you start a business, you will inevitably realize that you need a tool to efficiently collect client payments. You will at that point seek the services of a suitable merchant services provider.
Each company will have its model with a set of tools, services, and fees that will suit different types of business. A merchant must find a provider that has a model that works best for their type of business.
A merchant account is a bank account opened for a merchant specifically to make and receive payments. This differs from a standard bank account in that it allows electronic and credit card payments to come in and out of the account using a payment gateway.
A merchant account often has extra products that make electronic payments easier to manage. As a result, merchant account fees are often higher than fees charged for standard bank accounts. This will vary from merchant to merchant.
Merchants should shop around for an account provider that provides the best services at the best price. Sometimes choosing the cheapest option may cost more in the long run if the service provider is terrible.
Most banks require a business to meet certain requirements before they can open a merchant account for you. If your business is unable to qualify for an account, you may be forced to choose a merchant services provider that doesn’t require an account. However, you may experience holds on certain transactions while the merchant services provider verifies them. Additionally, if the payment services provider deems your business too risky, they may cancel your account without warning leaving you unable to receive client payments.
Key Takeaway on Merchant Services
So, in summary, how can you best answer the question, “what are merchant services?” The best definition is that it is a company that provides a business with the tools and systems that allow it to collect electronic and credit card payments from customers. For more information on merchant services such as how merchant accounts work and what merchant processing means, read the rest of our site.