Mar 25

What are Merchant Services?

In this dynamic world, businesses must evolve to meet consumers' evolving preferences. Learn about merchant services, and how they can help you thrive.

Payment processing can make or break a sale. Cash and checks are continually becoming less common. As the number of consumers switching to digital and electronic payments grows daily, the ability to offer customers various payment options could mean the difference between you and your competitors. In today’s world, merchant services have become increasingly vital in generating revenues and attracting new customers.

What are Merchant Services?

“Merchant services” is an umbrella term used to describe the various financial aspects that help businesses accept and process debit and credit card payments from their customers. In general, merchant services can range from anything such as the tools, software, hardware, financial relationships, and services that facilitate a transaction between a paying customer and a business.

Various entities are authorized to be merchant service providers, also known as merchant account providers, and can be in the form of acquiring banks, payment processing companies, acquirers, and credit card processors. By partnering with merchant service providers, businesses can automate their transactions online and receive payments using a card reader, card terminal, or point-of-sale system.

A card being tapped at a point-of-sale system

How Do Merchant Services Work?

Merchant service providers usually follow a standard procedure for managing and authorizing the payment made between customers and businesses.

First, the merchant (business, company, or organization) partners with a merchant service provider — typically a bank — to create a merchant account. A merchant account will be used by your business to safely accept debit, credit, Apple Pay, Google Pay, and other electronic payment methods. It will serve as the arbitrator between your business and the banks that provide the credit and debit cards your customers use.

When a customer purchases from your business, you collect their payment, and the customer’s bank then has to verify the transaction and authorize it. Once the payment is approved, the payment processor takes their fees and deposits the payment directly into your business’s bank account or merchant account.

A merchant account doesn’t operate the same way your traditional bank account does, where money is constantly deposited and taken out. Instead, it’s a business account that “loans” your business the cash from your paying customers — in minimal time — so you get paid quicker, since the transfer process between the acquiring banks and issuing banks can take a while to be completed.

Types of Merchant Services

Merchant service providers offer a variety of products that can process contactless and eCommerce payment options. Depending on the type of business, this can include credit card terminals, check processing, PIN debit cards, payment gateways, and a point-of-sale system.

Merchant services aren’t only limited to the tools businesses use to accept other forms of payment. Providers can also offer the tools necessary for companies to grow and improve their management and operations.

Gift cards, for example, are most effective in putting your name out there and generating brand awareness. Gift cards urge customers to continuously engage in your business to earn and spend credit, promoting customer loyalty and increasing revenue.

Why Do Businesses Need Merchant Services?

Getting started with merchant services can seem daunting, especially if you’re a small business, but with a multitude of features that can meet the various demands of your customer base, merchant services can bring invaluable benefits to your business in the long run.

1. Increase Sales

With over 76% percent of consumers having at least one credit card, offering digital payment options will encourage customers to come directly to your business instead of businesses that only accept paying with cash. If your company has other alternative payment methods, you will appeal to a larger pool of consumers and bring in more customers.

In addition, because a large population of customers is more likely to use electronic payment methods when making large purchases, the ability to take and process a variety of credit and debit cards can positively impact sales and the overall growth of your business.

A customer paying via her mobile phone

2. Improve Cash Flow

Making the switch to digital payment processes and being able to accept debit and credit cards will streamline the way your business manages transactions. With contactless payment methods and online transfers, purchases will be completed much faster as authorizations will usually only take seconds — with the payment being deposited into your business account within one to two business days, if not hours.

Instead of counting cash or waiting for check payments that could take up to three weeks in a roundtrip to be cleared by the bank, merchant services will enable you to do more by keeping your transactions organized and improving cash flow management and forecasting.

3. Increase Customer Satisfaction

In today’s digital age, customers enjoy flexibility when making purchases. No matter how much your consumers are willing to spend on the products or services you sell, they’ll be left inconvenienced and unhappy without a proper payment processor.

Providing your customers the flexibility to make purchases in several ways — whether through mobile payment, cash, checks, debit or credit cards, gift cards, or recurring billing — gives them complete control over spending their money. Your customers will enjoy and be satisfied with their experience with your business and are more likely to become returning visitors.

A happy customer carrying multiple shopping bags

4. Help Your Business Expand in Digital Spaces

Transforming your business or expanding it into eCommerce is crucial, as more and more customers gravitate towards online shopping and account management. With the right provider, merchant services can offer you efficient and reliable tools that can help you handle transactions online, including offering invoicing and options for credit, debit, eChecks, and online payments through a shopping cart.

With an online presence, your business will have a wider audience reach. You’ll have the potential to increase your revenue stream like never before since you’re no longer limited by displaying and storing inventory within a physical store.

Ready to take your business to the next level with merchant services? We’d love to help! Contact True POS for a free quote today.

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