When a business owner hears the term "merchant services" they typically think of a generalized idea involved processing credit and debit card transactions. While not entirely wrong, it simply misses the entirety of what merchant services are as well as how they can hep a business grow and prosper.
Any business that accepts credit and debit card payments will need to use merchant services. This is especially so if they want to expand into other payment processing areas such as online or mobile. To do this, a merchant will need to utilize a credible merchant services provider to utilize new technologies and realize new revenue opportunities.
However, it's important for a merchant services provider to know that each business is unique. For example, an eCommerce-based business may have different needs than a body shop. Even though security may be of paramount importance for each establishment, the eCommerce business will have higher security measures versus the body shop. In addition, the body shop will more than likely need a physical payment processor to process payments in person whereas the eCommerce business will simply need a virtual-based one.
So how does payment processing work? It begins with a merchant establishing a merchant services account with a provider. Once this is done then payments can start to be accepted.
When a merchant swipes a debit card, the payment processor simply acts as the traffic cop between the customer, merchant, credit card networks, and banks. The swiped card through the payment processor sends a message to the bank asking to either accept or decline this transaction. It does this by checking the account of the cardholder to determine if their is enough funds to cover the transaction. If so, the bank sends an authorization code to the processor who then passes it along to the merchant to process the payment and print out a receipt gathering the customer's signature (if needed).
However, if the transaction is denied then the processor is notified who then lets the merchant know who informs the customer. The merchant can then ask the customer for another form of payment to complete the transaction.
At the end of the business day, the merchant will send all the authorization codes they've received on that day to the processor. The processor will then send them all in one batch to the appropriate banks for settlement. This process is called batching or batch settlement.
However, because a merchant is dealing with sensitive financial information, it is important to have security protocols in place to prevent fraud. In the merchant services industry, their is a specific protocol called Payment Card Industry Data Security Standard (PCI DSS) or PCI for short. Everyone from the merchant to processors to banks have to adhere to these security protocols in order to minimize and prevent fraud when possible. This helps protect everyone involved should a breach of data or fraud occur. Should a merchant not be compliant and a breach occurs then they could face fines and penalties. In addition, they could lose their merchant services account which will have immediate impact on their revenues due to the inability to process credit and debit card payments. As well, they could gain a bad reputation with their customers causing them to lose even more business.
If your business is ready to select a merchant services provider, then where do you begin? A merchant can usually turn to the Internet to do a very simple online search using sites like Google. This will usually tell a merchant of the type and quality of companies that offer merchant services. Visit their websites and even read reviews from sites like the Better Business Bureau to find the best service providers. In addition, a merchant can ask other businesses who they use and recommend as a merchant services provider. Other businesses will usually have quite a bit to say about a merchant services provider whether it comes from a great partnership or awful experiences. In addition, feel free to reach out to the merchant services companies and speak to a rep to learn more about their levels of products and services. Since this is a technology-based industry, it's important for your service provider to be on the leading edge so you have access to the latest technologies you can use to decrease your costs while increasing profits.
Service doesn't simply end once the contract is signed and you have your payment processing terminals. It's important to know the level and kind of customer service given once you sign up with a merchant services provider. Should a need or an emergency arise, you will need to how and when a merchant services provider will address your concerns.
It's important that you know what rates and fees will be applied to your merchant services account. For example, some merchant services providers may tout the benefits of a free terminal which may sound good to a prospective merchant. However, many times their are higher than usual rates and fees associated with these "free" terminals so beware when you hear this.
In conclusion, these services may seem like something businesses might not need to know that much about. However, a properly educated merchant can use merchant services to help them reduce their business operating costs while increasing profits.