What is a Merchant Services Provider?
May 24, 2021
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When someone starts a new business, they are likely faced with a plethora of new information. For a business to stay afloat, the most crucial factor is accepting payments for the provided goods and services. The customer's ease is a crucial aspect that is factored into advances in the payment industry. This factor has led to the introduction of several payment methods, allowing the customers to proceed with payments even without the physical availability of cash or even cards!These newer and more efficient payment methods such as e-wallets and credit card payments come with their requirements for the entities involved. A retail or business owner cannot proceed with payments involving the customer's credit card information without a merchant account or a payment processor. A merchant owns a store, business or outlet and needs to process credit card payments for their customers. A merchant services provider is the payment processor that deals with the merchant's credit card transactions. The terms' merchant service provider', 'payment processor', 'merchant account provider', and 'acquirers' are interchangeable. And the main aim of merchant services is the processing of cashless methods of payment.
What is a Merchant Service Provider?
As declared above, MSP's are entities that allow merchants to proceed with credit card payments and other cashless alternatives. But their functions are not strictly limited to processing payments only. Merchant services have expanded to help support and augment the growth and transitions in business. They provide numerous services such as analysis of business data, services that enhance business efficiency and hardware that can benefit the vitality of a business. Not all payment processors operate in the same manner, there are countless different modes of operations when it comes to merchant services, but the most common types are;
Merchant Account Providers
These types of payment processors are the most common ones to come across. To be classified as a merchant account provider, the payment processor must provide you with a merchant account and facilitate you with credit card and debit card transactions. Even though the merchant services providers can provide you with the account, most of them cannot process your transactions through the credit card networks. The few that can process your cards are called direct processors and are the payment industry leaders. All the other merchant account providers rely on these direct processors to get their payments processed through the credit card associations like Visa, Mastercard and American Express.
Payment Service Providers
Merchant account providers usually come with a signed contract and monthly fees for processing. For smaller businesses that sometimes make no sale at all in a month, paying monthly fees can be impossible. So, merchant accounts are not feasible for all businesses. But for smaller businesses, there is always the option of choosing a payment service provider. These payment processors use a single account to accept all their merchants' payments, which eradicates the fees required for a merchant account at the end of the merchant. These accounts are not as robust as the ones provided by merchant services providers. Still, they are an excellent option for processing in the four to five figures per month.
Payment Gateway Providers
Payment gateways are modes through which merchants' website and the payment providers' online network can communicate to deliver information about the transaction. A payment gateway is a new type of payment processing that can eradicate a merchant's need to have a merchant account. However, some gateway providers do offer a merchant account as well. Some of the gateways can easily be linked to an already existing merchant account, and merchants can accept credit cards through it.
What Services do they Offer?
MSP's offer a wide variety of services that businesses can subscribe to based on their needs. Most businesses don't need every service that an MSP provides. Typically businesses only need a payment service provider or a merchant account. For example, if a business does not sell stuff online, a payment gateway is nearly useless. Therefore, knowing the nature of one's business is very important to get the correct merchant services. Common Services that MSP's provide are;
Merchant Account
When merchants accept credit card payments, the funds don't directly go to the merchant's business account. They are immediately deposited in a merchant account till they are ready to be deposited in the business account. Once the payment is final, the MSP deposits the amount in the business account.
Virtual Terminal
A virtual terminal is a means to turn your computer into a device that accepts payments. Merchants can use a USB-connected device to read the information from cards to be used for the transaction. These are common to businesses that don't own an online e-commerce website.
Point of Sale Systems
These systems can range from a singular card swipe or dip reader to a complete point of sale terminal used to accept even e-wallet payments. Point of Sale systems are almost necessary for businesses to accept payments physically in the store. MSP's have a variety of hardware they usually offer to merchants looking for POS systems.
Payment Gateway
As briefly described above, this is software communicating between the merchant's website and the processing networks of the payment processor. These are not needed by all merchants but are necessary for merchants who need to take online bills.
ACH Processing
ACH processing is a service through which merchants can scan paper checks in advance to ensure that the account of the customer has the necessary funds for the check to be cleared. ACH processing saves the merchant from trips to the bank and bouncing checks.
Small Loans or Cash Advances
If a business needs funds, most merchant service providers offer funds readily to their regular clients. They take the history of the business and the reputation of the business owner into account. Still, they can be very beneficial in times of need.
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