What is Merchant Services? Merchant Services is the means by which a business accepts electronic payment transactions (i.e. debit cards, credit cards, and eChecks) from its customers. It is imperative for successful businesses today to offer the option of accepting electronic payments. Consumer behavior is evolving, and fewer people are carrying cash.
What is a payment processor? A payment processor helps transfer the information to the card brands and banks. Businesses are connected to the processor through the hardware or software they are using, and when they run a transaction, the information is routed to the appropriate network. When a merchant “batches” or closes out for the day, the funds are moved from the issuing bank to the merchant’s bank. They will then calculate the interchange fees and provide the data to the merchant and the card brands.
Tips for choosing a Merchant Services partner:
1. Hardware that meets your business needs. There are many different hardware options and it is not one-size-fits-all. Options include traditional POS terminals, mobile solutions, virtual terminals and online payment sites.
2. Software that keeps track of your business as it grows. Merchant Services solutions can do so much more than process transactions. They can also integrate into a range of third-party systems and applications that will do everything from tracking your cash flow and inventory to gift card management.
How your merchant account will be integrated will depend on how you are accepting payments. Online, by the phone and POS terminals all require different integration based on the software. Ensure that you understand how fast and easy the integration is and whether there will be any delays in your sales process due to this. A fast and easy process is becoming more and more common as technology grows.
3. Honest marketing and advertising. Beware of marketing gimmicks. If a new vendor entices you with what sounds like a great offer, give your current processor the opportunity to review and compete, if possible. This will help protect you from signing a contract that may have hidden fees or unfavorable terms. Be sure you read each term and condition in your contract and that you understand the details.
4. Reasonable, transparent fees. Merchant service pricing can get very complex and there are a few different pricing models/structures, but here are three main elements of your credit card processing fees:
• Interchange fees are paid or collected by the card-issuing banks that provide Visa, MasterCard, Discover and American Express cards. Each card brand has its own interchange rates. It’s important for merchants to know how their business is processing transactions and to consider managing factors like monitoring downgrades, processing Level II/III data, proper technology configuration, transaction timing, operating procedures and PCI compliance, in order to ensure the best interchange rates.
• Assessment or services fees have to be paid to the credit card networks and are collected by payment processors. This fee type covers the use of the network and card brand. It’s calculated based on monthly sales and not individual transactions, and a couple more factors weigh in too, such as your card type (credit or debit) or if you processed foreign transactions.
• The payment processor’s markup goes to your payment processor for using its product and can also be charged per transaction or monthly. Be sure to choose a payment provider who offers transparent fee management, so you know what you sign
up for.
5. High quality customer service and support. This is one of the most important pieces when selecting your merchant services provider. I can’t tell you how many times someone from my team has stopped by one of our small business partners to drop off replacement equipment on a busy Friday afternoon. You are not going to experience that level of service with many providers. Often, sellers disappear once the contract is signed and pass off all support to a 1-800 number. It’s important to have a combination of local on-site support in addition to a 24/7 support line.
Be sure to check out online reviews and talk with your fellow business owners for recommendations concerning the best companies to hire versus those to avoid.
