With the ever-expanding payment options and evolving customer preferences, it becomes crucial to partner with a reliable merchant services provider that offers the convenient payment methods your customer’s desire, including credit card processing and mobile and contactless payments. To aid you in navigating the multitude of vendors available, we have compiled a list ranking the best merchant services for small businesses. This resource will provide you with a clear overview of their features, costs, and capabilities, making your decision-making process much easier.

What do you Mean by Merchant Services?

Merchant services enable businesses to accept credit and debit card payments by securely transmitting customer information to card networks and issuing banks, ensuring access to the payments received. Providers offer various related products and services, each with unique pricing models like flat rates, interchange-plus, or membership plans.

How Does it Work?

• Customers can make purchases at your store by either swiping their credit card or entering the card details.

• The data from your POS software is transmitted to the merchant services provider (MSP) of your choice.

• The merchant services provider (MSP) contacts the client’s respective Credit Card Association to verify if they have sufficient credit for the intended purchase.

• The association verifies with the consumer’s bank and subsequently sends the MSP a response, hopefully agreeing the transaction.

• Upon receiving approval, the MSP finalizes the payment and sends a receipt for the consumer’s purchase.

Factors you Must consider While Choosing the Top Merchant Service Provider

When evaluating payment service providers, it’s essential to recognize that they compete based on various features that may not immediately come to mind. As you assess your options, carefully consider which of these aspects align best with the needs of your business:

Easy-to-use: Are you looking for user-friendly app and hardware options that anyone can easily use, or does your team prefer a more sophisticated system with advanced features?

Price: The costs associated with payment service providers can vary, including monthly subscription fees, per-transaction fees, and upfront charges for hardware. It’s essential to assess the fees for each service based on your typical transaction volume to choose the most cost-effective system for your business.

Payment options: Before selecting a merchant service provider, ensure they offer a range of payment solutions, including credit purchases, making transactions using debit cards, and lastly but most importantly, mobile payments. Additionally, check if they work with an Independent Sales Organization (ISO), which is a third-party service that offers credit card processing related facilities that handles dealings entirely on your behalf in exchange for a percentage of your sales,

Hardware Features: When considering payment service providers, determine if a mobile app is sufficient or if you require a robust point-of-sale system. Alternatively, a simple card reader may be suitable. For in-person businesses, prioritize providers offering the necessary hardware at a reasonable price.

Flexibility to grow/ Scalability: While choosing a payment system, think about the future trajectory of your business in the next year, five years, or even ten years. Will the system you opt for now accommodate your growth? Is it easy to switch if needed? Weigh the possibility of investing in a slightly more expensive system now to prevent headaches down the road. Long-term planning can save you from potential challenges in the future.

Customer Services: In the event of any issues, having reliable support to manage your merchant account and transactions is crucial. Your chosen merchant service provider should offer a comprehensive customer service support system, ensuring faster resolution of challenges and minimizing any disruptions to your business operations.

Types of Providers

The services are available in different types, namely:

Merchant Account Provider: If you wish to receive funds from credit or debit card transactions, you require a solution that processes these funds from your account and deposits them into your seller’s bank account. A merchant account provider serves as the bridge for facilitating this transaction. However, it’s important to note that some merchant account providers may offer only the merchant account without any card processing capabilities.

Payment Services Provider: Payment processing services, such as PayPal, provide alternatives to traditional merchant accounts. These services typically have lower account fees since you won’t have a unique merchant identification (ID). Unlike merchant accounts, using these services doesn’t involve being tied to contract agreements, providing more flexibility for your payment processing needs.

Payment Gateway Provider: For online transactions, a payment gateway is essential as it acts as the technology that connects all parties involved, enabling seamless payment processing. Payment gateway providers can either set up a new merchant account on their platform or integrate with your existing merchant account to facilitate transactions efficiently.

Fees and Rates

The fees associated with merchant services are influenced by factors like account fees, equipment costs and transaction processing fees, and. While some providers may charge setup fees, better ones typically do not. Pricing models can vary, including flat monthly rates, bundled pricing, per-transaction pricing, and potentially additional markup fees. It’s important to understand these details when selecting a merchant service provider.

A regular merchant account fees comprises of:

• Gateway fee – Ranges from approximately $10 every month / from $0.10 per-transaction.

• Statement fee – $5 that covers customer support services and billing statements.

• PCI Compliance fee – $100 for securing your consumer data annually.

• Chargeback fee – Starts from $15

Payment processing fees typically consist of an transaction rate, usually around 1.5% per transaction, along with additional pricing. The payment method employed can also impact the cost, with card swiping and online transactions often having different charges.

Equipment costs encompass various items required for your business, such as card readers, POS systems and other applications, which can be quite costly. To save money, consider using a virtual terminal like PayPal as an alternative option.

When is the Right Time to Invest in Merchant Services?

Merchant services play a crucial role in the success of Ecommerce and service-oriented businesses. As digital payments become more prevalent, it’s essential to find a solution that caters to both in-person and online transactions while adhering to all legal and financial requirements for secure fund transfers from the buyer to your seller account.

Neglecting to invest in a merchant service solution can lead to a decline in customer experience and revenue potential. Merchant services offer flexibility to suit your business model. For retail, portable options for on-the-spot transactions may be preferred. Even high-risk businesses can find solutions, though they may come at a higher cost due to chargebacks.

Investing in merchant services provides access to a wide range of valuable features, including invoicing tools, app integrations, virtual terminals, shopping carts, payment processing hardware, and more. With scalable options available, you can leverage these services and features to foster the growth of your business.

While evaluating merchant service providers, it’s essential to consider costs, as each provider has its own fixed charges/ fees that can either align with your budget or create financial strain. To find the best fit for your business, explore various pricing options, for instance flat fees or monthly rates or per-transaction charges.

Payment Processing Contracts

A payment processing contract, in simple words is a contract concerning a merchant and a merchant services provider/ payment processor, which specifically lays out the details regarding rates, fees and other liabilities associated with the service. Contract durations may vary from month-to-month or to sometimes, three-year terms, and an early termination fee could apply if the contract is ended prematurely. The contract will outline the interchange rate, specifying the fees payable to credit card companies (e.g., Visa or MasterCard) for transaction processing. It will also include details about Payment Card Industry and Data Security Standard (PCI DSS) compliance fees, essential for demonstrating that your business is secure for credit/ debit card payments.

In addition to outlining fees, the payment processing contract may include equipment leasing costs for hardware, such as credit card readers. These devices ensure secure and efficient processing of swiped or keyed-in cards. Since salespeople may not be required to disclose all fees, it’s essential to be vigilant and review the contract thoroughly. Hidden fees could lead to signing an expensive contract. Hence, carefully check the monthly and per-transaction fees that you’ll be obligated to pay with the merchant service provider.

Bottom Line

Merchant services play a vital role in streamlining business operations, ensuring faster and secure processing of card and online transactions. Utilizing these services enables you to offer your customers superior service and a positive user experience. With their convenience, agility, and competitive pricing, merchant services provide businesses with multiple options to fulfill their payment needs efficiently.

Frequently Asked Questions