Running a business today is complicated. Customer expectations are changing with technological advances, while younger generations hold the power of the purse. The first generation of true digital natives, Generation Z, already possesses between $29 and $143 billion in purchasing power. And this generation’s eldest members are only turning 23 this year. Digital transactions have ramped up over the past few years, with a current total transaction value of more than $961 million in the United States so far this year, with expectations of hitting $1.34 billion by 2023.
Running a business is getting more complicated with each passing year (or even month, so it seems). With so many shopping options, merchants must attract a generally distracted consumer base while attempting to satisfy generational preferences. As a business owner, should you have an online store? Should you accept e-wallets or wearable payment methods? And, what’s around the corner when it comes to payment methods and shopping preferences?
With your to-do list already a mile long, it’s hard to find time to research payment processing services that will please your customers while bolstering both your reputation and bottom line. That’s why we decided to provide you with a shortcut here: everything you need to know about merchant services in one article.
Now, in full disclosure, you may need to do a bit of homework on your own if you’re expanding your payment processing services, looking for a new provider, or starting from scratch. However, we hope the information in this article saves you some time so that you can focus on your main priority: your business.
What are merchant services?
Merchant services are any services used by a business allowing it to accept and process customer payments in a store or online. Most often, merchant services are associated with traditional credit card processing services. However, with digital payments gaining traction and 60% of millennials buying online, merchant services now incorporate chip cards, NFC contactless payments, or mobile wallets, such as Apple Pay. Merchant service providers (MSP) are the entities offering merchant services.
When you install a merchant processing service, your payment system digitally communicates with your customer’s financial institution. Merchant services allow your customers to pay securely when and where they want, whether it’s in your store or on-the-go.
Let’s delve into the details of the process.
What is the merchant services transaction process?
Traditionally, merchant services apply to credit card processing. To process credit or debit cards in a physical store, merchants will need a credit card processing terminal and a merchant account. First, the customer runs the card through the terminal. The transaction information, such as the purchase amount, the credit card number, and the issuing bank information, is then sent from the merchant service software program to the MSP.
Next, the MSP sends the transaction information to the credit card association provider, such as Visa or Mastercard. The association provider then sends the transaction information to the customer’s bank, such as Citibank or Chase. The bank confirms that the customer has the amount available, either on a credit card or in a bank account, if the customer pays with a debit card.
If the appropriate amount is available, then the issuing bank will send an authorization to the credit card association approving the transaction. The association will then confirm the approval with the merchant’s MSP. Finally, the merchant completes the sale in the store, issuing the customer a receipt. After the completion of the transaction, the customer’s funds will be transferred to the merchant’s operating account.
For ecommerce payments, merchants must also implement an online payment gateway. A payment gateway communicates the card information to Visa, American Express, Mastercard, or Discover. If the customer uses a debit card, the payment gateway communicates directly with the customer’s bank. For online transactions, a secure payment gateway is a must-have.
How are merchant services different than a point-of-sale system?
Merchant services are often used synonymously with point-of-sale systems. As described above, merchant accounts allow for the processing of customer payments. In addition to processing payments, merchant services can also process gift cards and customer loyalty programs. If you have merchant service processing, it may be incorporated into your point-of-sale (POS) system.
POS systems offer more services than simply merchant processing. For example, a POS system allows merchants to manage employees, run reports, and track inventory. Merchant services don’t offer these functions. However, many MSPs now offer merchant services within POS systems, giving merchants a holistic approach to running their business.
What to look for in a merchant services provider.
It’s easy to be overwhelmed by the number of MSPs in the marketplace. Don’t accept a cookie-cutter option. Instead, look for a merchant services provider that can tailor processing services to your business. After all, your business is your business; it’s not like anyone else’s.
When choosing a merchant service provider, here are some tips to consider:
- What type of services do you need? Do you have a brick-and-mortar store? Do you only operate online? Do you need a combination of services?
- Where do you plan to take your business? What are your growth plans? Will the MSP grow with you, offering updated payment technology in the process?
- What are the fees and associated costs? Are there set-up costs? Monthly costs? Per transaction costs? Termination costs? Be sure to understand your financial commitment.
- What type of customer service does the MSP offer?
- What type of training does the MSP offer?
- How long does it take to set up the equipment and software?
- Consider the MSP’s experience. Check out company reviews and learn more about their position in the market.
- Understand the features of the processing system. What does it offer? What can it do? More importantly, how can it benefit your customers and your business?
- Are the processing services PCI-compliant? What other security measures are offered, protecting the safety of your customers’ financial information?
- Does the MSP offer services tailored to your business, such as the restaurant or retail industry?
- Finally, be sure you carefully review your contract terms. Are you locked into a five-year term? How can you terminate your agreement? Are there penalties if you terminate early? Understanding your business agreement is just as important, if not more, than any bells and whistles you may find appealing.
The right processing system can help create a positive customer experience while helping you grow your business, no matter what size it is. At North American Bancard, we can help guide you through the setup of a new merchant processing service. Our credit card processing equipment is PCI-compliant. We offer low processing fees and don’t require long-term contracts.
We help make it easy to provide your customers with the online frictionless transactions that they’ve come to expect. Join the hundreds of thousands of businesses who power their profitability with NAB’s connected commerce to the tune of more than $45 billion in transactions each year.
Whether you’re looking for in-store credit card payments or online payments, we make it easy to get the technology you need to accept payments in the modern world. We’ll help you tailor a payment processing plan to your specific business, while following the PCI-compliance steps, giving you peace of mind. To set up a consultation, contact us here or give us a call at 877.840.1952.