Payments are a complex topic for any merchant to navigate. Merchant service providers offer significant help in this regard, helping you figure out things like compliance, infrastructure needs, and fraud prevention.
But what is a merchant services provider? A merchant services provider or MSP is an entity that helps businesses process and safeguard your customer’s payments. Merchant services providers offer everything from payment gateway setup to point of sale machines. They can also help you set up merchant accounts, helping you process payments quickly.
Here’s how merchant services providers work and how you can evaluate the best ones for your business.
What is a merchant account?
A merchant account is a type of bank account that allows businesses to accept payments from customers through credit and debit cards. Merchant accounts are established through a merchant service provider. These accounts are necessary for businesses that want to process card payments from customers.
When customers purchase goods or services from a business, the merchant account is used to process the payment. The merchant service provider will charge a fee for each transaction, usually a percentage of the total sale.
Merchant accounts are different from consumer bank accounts in that they have specialized features designed to help merchants manage their payment processing. These features usually include fraud prevention and payment analytics, as well as the ability to accept multiple payment methods.
Why do merchants need a merchant services provider?
Merchants need merchant service providers to accept payments in person or online. Note that merchant account providers and merchant services providers (MSPs) are often used interchangeably.
MSPs give businesses the hardware and software to accept these payments and handle the backend processing and settlement of transactions. By working with an MSP, merchants can streamline their payment acceptance process and offer their customers a convenient and secure way to pay.
Merchant services products
Merchant services providers offer a variety of products and services to help businesses accept and process electronic payments.
Some examples of these products include:
- Credit card processing: Allows businesses to accept and process credit card payments from customers.
- Debit card processing: Allows businesses to accept and process debit card payments from customers.
- Electronic check processing: Allows businesses to accept and process electronic check payments from customers.
- ACH (Automated Clearing House) payments: Allows businesses to accept and process electronic payments made through the ACH network, which is a system that facilitates the transfer of money between banks.
- Mobile payments: Allows businesses to accept and process payments made through a mobile device, such as through a smartphone or tablet.
- Point of Sale (POS) systems: Provides businesses with hardware and software to accept and process in-person payments from customers.
- Payment gateways: Allows businesses to accept and process online payments from customers.
The benefits of a merchant services provider
There are several benefits to using a merchant services provider, including:
- Accepting payments in all forms: MSPs allow businesses to accept a variety of electronic payment methods, such as credit and debit cards, electronic checks, and more. This makes it easy for businesses to offer customers multiple payment options. Offering multiple payment options helps merchants grow quickly by offering customers several ways to pay.
- Payment security: MSPs often offer fraud protection and data protection to ensure customers’ personal and financial information is secure during the payment process. This protects customers from identity theft, fraud and other malicious activities.
- Payment analytics: MSPs can provide businesses with useful insights into their payment data, like the best customer regions, flagging suspicious transactions, and more.
Who is the best merchant services provider?
There is no single “best” merchant services provider since much depends on the business. Most merchants will find services like Stripe and GETTRX the best. Typically, these merchants offer fast onboarding and instant payment acceptance solutions. Note that popular merchant services providers like Stripe might not support a merchant if its business is considered high risk.
Larger enterprises (such as public companies) prefer big banks like Bank of America or Wells Fargo since these banks combine several enterprise financial solutions such as trade finance and revolving credit lines with their merchant services package and other alternative payment methods.
What to look for in a merchant services provider
Here are the most important factors to look for in a merchant services provider.
1. Ease of onboarding
When it comes to choosing a merchant service provider, ease of onboarding should be at the top of your list. After all, who wants to spend hours of their precious time trying to get set up with a provider that won’t make their business easier?
Here’s what to look for:
- Streamlined onboarding processes: Look for a provider that has an easy-to-follow, step-by-step process that allows you to get your business up and running quickly.
- Comprehensive customer support: Customer support should be available 24/7, so you can get help with any issues that arise. This includes live chat, phone support, and email support.
- Comprehensive training resources: A good merchant service provider should offer comprehensive training resources, such as tutorials, guides, and helpful videos.
- Multiple integration options: Look for a provider that offers several integration with other systems, such as accounting software, ecommerce platforms, and payment gateways. This will make it easier for you to manage your business.
- Robust security measures: Security is a huge priority when evaluating a merchant service provider. Look for a provider that offers robust security measures, such as PCI compliance, encryption, and fraud protection.
2. Service provider status
It is important to determine whether a potential MSP is a registered merchant account provider, or if they are simply a reseller or ISO (learn about ISOs versus PayFacs) of another company’s technology. Resellers will typically have less say over their workflows and might not offer a high level of service.
You can check the Visa Service Provider Listing to see if a service provider is an MSP or a reseller. Resellers will not show up in results when their names are searched. This resource is used by businesses and customers to identify trusted MSPs and ensure that they are following Visa’s standards, as well as relevant laws and regulations like the Payment Card Industry Data Security Standard (PCI DSS).
It is important for businesses to check the listing before signing up with an MSP to ensure that the MSP is legitimate and compliant. Customers should also check the listing to ensure that their data is secure when making payments.
Evaluating cost isn’t always easy, as there are many different fees and charges to consider. Here’s a guide to how you should go about evaluating the cost of a merchant services provider.
- Look for hidden fees: Many merchant services providers will advertise a low rate but then charge additional fees that can quickly add up. These fees can include setup fees, monthly fees, statement fees, per-transaction fees, and more. Ask the provider to provide a detailed list of all fees so you can get an accurate picture of the total cost.
- Compare interchange rates: Interchange rates are the fees charged by issuing banks, such as Bank of America and Chase, to process payments. These rates vary depending on the type of card and the amount of the transaction. Merchant services providers typically charge a markup on top of these rates. Compare the rates offered by different providers to make sure you’re getting the best deal.
- Consider volume discounts: If you’re expecting to process a large number of transactions each month, look for providers that offer volume discounts. These discounts can significantly reduce your costs.
When selecting a provider, it is important to make sure that they are transparent about their pricing and services so that you can make an informed decision.
- Examine the terms and conditions: Before signing up with a provider, it is important to read their terms and conditions carefully. This document should outline the services they provide, any fees associated with those services, and how those fees are calculated.
- Security Practices: Security is another important factor to consider when evaluating a merchant services provider. Make sure you understand any security risks associated with their services.
- Ask about service level agreements: Merchant services providers have service level agreements (SLAs) in place to outline the services they will provide and the quality of those services. Ensure that the provider is clear about their SLAs and the penalties for any breach of those agreements.
Experience ensures that the MSP has the necessary resources and infrastructure in place to support your business. This includes things like robust payment processing systems, customer support teams, and security measures to protect your customers’ data.
Consider this key factor in the overall quality and reliability of the MSP’s services. Review the service provider’s reputation on websites like the Better Business Bureau (BBB). For instance, here’s GETTRX’s BBB listing. By choosing a MSP with a long history of success in the industry, you can be confident that they have the expertise and knowledge to provide reliable and high-quality payment processing solutions.
The four best merchant services providers
There are a wide variety of merchant services providers available to businesses, each with its own unique features and benefits. Here are the four best merchant service providers:
GETTRX is a registered merchant account provider with the major credit card networks, as well as a registered Payment Facilitator and PSP (Payment Service Provider). We have the necessary infrastructure and experience to handle payment processing for businesses of all sizes, including high risk merchants.
As the merchant service provider of choice, we offer an extensive range of services and industry experience. Well-versed in the unique needs of high risk industries such as adult, CBD, vaping, and e-cigarettes.
In addition, GETTRX also provides support for drop-shipping, which is an increasingly popular method of selling online. GETTRX stands out from other merchant service providers like Stripe due to its commitment to providing services tailored to the needs of the customer.
We are experienced in navigating the complexities of any business need, making us a great partner for any merchants who are looking to expand their sales.
Square has become a favorite for many small business owners. However, like any merchant services provider, there are both pros and cons to using Square.
One of the biggest advantages of using Square is its simplicity. With Square, businesses can easily set up an account and start accepting payments in minutes. Plus, businesses don’t need to purchase any additional hardware to use the service, and all Square transactions are securely processed.
Another advantage of Square is its low fees. Square charges a flat fee of 2.6% + 10¢ per transaction, which is lower than most other merchant services providers. In addition, Square offers businesses a variety of additional services, such as the ability to issue refunds, send customers invoices, and set up recurring payments.
However, simplicity can be a double-edge sword when using Square as it isn’t as customizable as other merchant services providers. For example, businesses may not be able to accept certain types of payments, such as checks or gift cards. Additionally, businesses may not be able to set up more complex payment structures, such as recurring payments.
Overall Square’s offerings are limiting for businesses in high-risk industries. For those looking for a simple offer for a flat fee Square may fit the bill. And while Square does offer customer support, some businesses may find it difficult to get a response from customer service representatives in a timely manner.
PayPal is one of the most popular and widely used payment processors for businesses and individuals. It offers a secure, cost effective and convenient way to accept payments from customers and clients.
The main benefit of using PayPal as a merchant services provider is that it is easy for customers to pay merchants using this channel. PayPal integrates with almost any website and businesses can use other services under the PayPal umbrella to offer additional payment options, whether online or in person.
However, PayPal can be less than ideal for merchants. Arbitrary fund holds, an initial 60 day fund withholding process, non-existent customer service, and zero recourse to decisions make PayPal ill-suited to most merchants.
Overall, PayPal is a secure and convenient payment processor that offers a variety of payment options and low transaction fees. However, the negatives might turn merchants away from using it as a regular payment acceptance channel.
Stripe’s platform is known for its ease of use, flexible pricing, and robust developer tools, making it a popular choice among small and large businesses alike.
Stripe’s platform is designed to be user-friendly, making it easy for businesses of all sizes to get started with accepting payments. The company also provides detailed documentation and support resources to help users troubleshoot any issues they may encounter
Stripe’s developer tools allow businesses to fully customize the look and feel of their checkout experience, making it easy for businesses to match the checkout process to their brand.
While these advantages make Stripe a great choice, there are significant drawbacks merchants must be aware of. For starters, Stripe’s algorithms are hostile towards high-risk merchants. Also, Stripe routinely flags transactions and freezes funds if the slightest deviation from a normal pattern occurs.
The lack of recourse and arbitrary fund freezes makes Stripe less than ideal for most merchants, despite fast onboarding and ease of use.
A merchant services provider is essential to succeeding in business these days. Take care to evaluate potential service providers based on the points in this article.
Curious about how GETTRX can help you grow your business through customized merchant services? Get in touch with us!
Frequently asked questions:
What is a merchant services provider?
A merchant services provider or MSP is an entity that helps businesses process and safeguard your customer’s payments. Merchant services providers offer everything from payment gateway setup to point of sale machines. They can also help you set up merchant accounts, helping you process payments quickly.
What is a merchant account?
A merchant account is a type of bank account that allows businesses to accept payments by debit or credit cards. It enables a business to process and accept card payments, either in-person or online. It may also include other payment processing services such as electronic checks, ACH payments, and more.
Do I need a merchant services provider?
Merchants need merchant service providers to accept payments in person or online. Note that merchant account providers and merchant services providers (MSPs) are often used interchangeably, but they are actually two different types of services.
Who is the best merchant services provider?
There is no “best” merchant services provider that fits every business. Some popular MSPs include:
- Bank of America
- Wells Fargo
Businesses in high-risk industries may prefer MSPs that specialize in serving their industry, as they may have specific compliance and risk management needs. The best merchant services provider for a business depends on its specific needs and preferences.