What is a Merchant Services Provider?
The phrase “merchant service provider” is a catchall term that refers to hardware, software or services needed by businesses to receive card payments. However MSPs don’t just work on consumer transactions; many also offer their expertise on how best process transactions from offline customers such as online payments or card less transactions.
Types of Merchant Service providers in the USA?
Merchant services providers offer different types of services, but most can categorised as the following:
Merchant Account Providers
These are the most common merchant account providers. At minimum, they provide you with a means of accepting credit card payments and processing them so that customers’ money is released to your business when they pay by debit or charge cards instead. The larger companies like PaySafe (see review) can offer services to process your transactions through the credit card networks like Visa and Mastercard.
Payment Services Providers (PSPs)
Accepting credit and debit cards is a convenience for many small businesses, but not all of them need a merchants account. Payment Service providers like Square (see review) can give your business the ability to accept credit card payments without a dedicated merchant account. These work well for SMBs that don’t process large volumes of transactions.
Payment Gateway Providers
A payment gateway is a must-have for online stores. 76% of US adults are expected to make an online purchase in 2022 alone. And the best way for online businesses to take payments is with a payment gateway. Payment gateways like Stax by Fattmerchant (see review), Helcim (see review) and Payment Depot (see review) facilitate online transactions while protecting sensitive cardholder data. This means customers can securely buy items from your store without the risk of identity theft. These providers also are able to efficiently handle high volume of transactions.
How to find the right fit for your business?
Here are some points you should consider when deciding the best merchant service for your business:
How easy is it to use?
Can you or your employees easily navigate through the system, or will you need something else that’s simple to use like an app?
How much does it cost?
Don’t blow your budget. Don’t just look at the month-to-month software costs but also factor upfront hardware costs. If you are switching service providers then check for potential termination charges. Watch out for any hidden fees.
What is the type of system?
Some businesses might use their phone as a point of sale; other might need an integrated system and multiple registers. Comparing the different merchant service providers, you might be able to lease some components and avoid certain upfront fees.
Is the system scalable?
Make sure the system can keep up with your growing business. You may start off at a lower tier being a smaller venture but as you grow you want to be able to easily upgrade to support your expanding operations. You don’t want to have to switch to a new system from what your employees and you are used to.
Does it support contactless payments?
More customers opt for this safer payment method these days, it’s an important option to have available.
Do they provide good service support?
When something goes wrong, you want to ensure it’s a quick fix. 27/4 support and live chat support are helpful in avoiding any operational disruptions. Some MSPs also have helpful knowledge base for reference on their platforms.
Merchant Services Fees and Rates
Estimating actual costs associated with a service can be hard, especially when merchant service providers have so many different ways of calculating their quote. Not to mention a few of them also offer custom packages where additional costs could be hidden in the fine print. Here are the one you should look out for:
Interchange fees are the largest fees you’ll pay and are usually a percentage of each transaction generated plus a fixed fee like 2% + $0.10 per transaction.
Assessment fees are usually based on your estimated monthly sales volume. Some providers charge an incremental portion of your sales. Example., 0.11% on up to 2,000 sales, then 0.12% of the next 2,000 sales and so on.
Periodic service charge
Whilst most merchant service providers don’t charge a monthly or annual service fee, always keep an eye out for the ones that do.
Terminal fees are basically the cost of leasing a payment terminal for your store, not your online business. These fees can pile up so often it is more cost effective to purchase a terminal outright. You can assess based on the needs of your business.
Payment gateway fees
Payment gateway fees apply specifically to online businesses. Here you essentially pay for online sales where the gateway acts as virtual payment terminal.
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