It’s essential to include online ordering to utilize alternative payment methods (credit card, digital wallet, etc.), especially for small businesses that have just begun operating in recent years. Whereas cash is suitable for most transactions, the modern customer expects more. This means the introduction of merchant service providers to your daily operations; however, most people don’t know who those providers are or what they do.

This article offers answers to the essential questions about merchant services—definition, how these services are used, and advantages and disadvantages.

Merchant Services Definition

Simply put, merchant services process electronic transactions. Regardless of the payment type, a merchant service provider moves payments from one bank account to another. This process is also known as credit card processing.

Merchant service processing occurs in several stages:

During this process, fees are charged to the merchant conducting the transaction for the services rendered. While these fees are capped at 4% of the total transaction by federal law, nonetheless, they are a considerable expense for small business owners.

What other services are included?

Merchant service providers primarily process transactions (see chart above). Depending on the provider, some may offer additional services that benefit your small business. Some of the more common additional features might include:

Companies with these additional services can use them to better understand and motivate their customer bases. For example, loyalty programs rely on a customer’s purchase history to offer specials on their most commonly purchased items. This motivates these customers to return to your store to purchase high-value items.

What equipment do I need for merchant service processing?

Because credit card processing happens online, the first thing your business needs is a stable internet connection. You will also need a card reader and a POS terminal to process the payment on your end.

What type of POS system you choose is really about determining what your business needs. Traditional registers work just fine for most daily operations; however, some owners are looking for more utility. Brick-and-mortar stores likely need just a countertop model, but businesses offering mobile services should consider a tablet-based model, as they offer additional features to streamline daily operations.

Perhaps most important is signing up with a reputable processor, which often comes through a POS provider; provided they are reputable, much of this equipment will be provided when you sign up.

Is merchant service processing secure?

Generally, yes, but it’s important to note that there is always risk involved in credit card processing. For this reason, it’s critical to think about the reputation of your merchant services provider. Check the provider’s history for records of previous leaks (as well as how they were handled) to get an idea of its track record. Ideally, there will be none, but the company should have a proven track record of a) fixing the leak and b) appropriately compensating its clients.

Many possible issues can arise with merchant service providers. A few major red flags to look out for include:

Although the processor will provide a certain level of security for your transactions, you can add to it by using private security measures on your terminal for additional levels of security to payments. These measures can result in further expenses; however, the benefits may outweigh the negatives if you are particularly concerned.

However, choosing the right provider does a lot of the heavy lifting for you. In addition to general security measures, the provider can discuss additional options with you as you sign up. This leads to perhaps the biggest question on our list—which provider do I choose?

How do I know which payment processor to select?

This is the main question that most small business owners face. Because there are so many different providers, it can be difficult to pick between options. While this does pose some problems, there are a few central elements to keep in mind, including:

Keeping these qualities in mind, business owners should be able to make more informed decisions about their merchant service providers. This does not necessarily mean that their first choice will always be correct; for that reason, we also highly recommend selecting a provider that offers the option to close a contract when necessary. Small business owners should examine their entering agreements closely, noting the terms of cancellation for such a contract.

What does the startup process look like? (Cost, qualifications, etc.)

Your merchant service provider is effectively the institution that allows you to conduct business in the 21st century. An increasingly large portion of online sales requires it to survive, let alone thrive. For that reason, we highly recommend carefully considering your options in choosing the one best suited for your business.

That being said, the choice is explicitly difficult. For this reason, many small businesses choose to go with an established POS provider that includes merchant service processing. POS providers like talech do just this; in addition to offering industry-specific features, we include processing through Elavon to handle our payments. This simplifies the onboarding process and allows business owners to get started in just a short period of time. Best of all, we offer a free demo for you to try out for yourself.

Featured articles