A Merchant Service Provider (MSP) is a company that facilitates the processing of payments for businesses. It allows businesses to accept debit and credit cards and other digital payment methods such as ACH, Apple Pay, Google Pay, and PayPal.
Knowing which Merchant Service Provider is right for your business can be tricky. There are a lot of different providers out there, and it can be tough to figure out which best fits.
This article will discuss what a Merchant Service Provider is and its features. We’ll also cover the different types of MSP and how you can choose the best one for your business.
What is a Merchant Service Provider?
A Merchant Service Provider provides an end-to-end suite of services to make accepting various forms of payments easier for business owners. They offer business owners tools and services required to set up merchant accounts, integrate payment gateways, prevent chargeback, and process payments for subscription-based services.
MSPs provide merchants with point-of-sale technology, reporting tools, fraud protection, and chargeback management services.
MSPs come in different models. Independent Sales Organizations (ISOs) and third-party MSPs include PayPal, Square, Stax, and Stripe. Established banks like Bank of America and Wells Fargo also provide merchant services.
Various MSPs are also available depending on a company’s needs and preferences. For example, some MSPs offer interchange-plus pricing while others use flat or tiered pricing models.
Some MSPs specialize in specific industries, such as retail stores or restaurants, while others may offer services tailored specifically for high-risk industries like gaming or travel ticketing companies.
Some providers focus solely on providing software solutions like POS systems, while others offer full-service solutions that include hardware options.
Types of Merchant Service Providers
As businesses become more reliant on digital payments, understanding the different types of Merchant Service Providers is essential for determining which best suits their needs.
Merchant Account Providers
A merchant account provider is a company that allows businesses to accept credit and debit card payments from customers through mobile readers, POS systems, or terminals they provide in exchange for a fee or commission on each transaction processed through the account provider’s services.
These providers offer processing services that integrate with credit card networks such as Visa, American Express, and Mastercard.
Using a merchant account provider can be useful if you do not have access to merchant accounts because you’re considered a high-risk business.
Merchant accounts provided by these entities will usually come with features like payouts within two days, chargeback protection, customer support options, and more – depending on the type of service chosen by the business owner.
Payment Service Providers
Payment service providers allow a business to accept electronic payments without having a designated merchant account. The most common PSPs include Square, PayPal, and Stripe.
PSPs enable small businesses and startups to accept online payments without needing a separate merchant service provider to process debit and credit card payments. These accounts are pooled with multiple merchants, so there is no unique ID number given for each user.
PSPs may offer additional benefits over merchant accounts, such as lower transaction fees, easier integration into existing software solutions handling customer data collection, etc. This makes them an excellent choice for smaller businesses looking to expand their payment options quickly and cost-effectively.
However, using PSPs comes with higher risk factors as they can freeze or terminate your account without warning upon violating any terms or conditions.
Payment Gateway
A payment gateway provider is necessary if you plan on accepting online credit card payments from customers through your website or mobile app.
Payment gateways provide secure encryption methods which protect both parties from any potential fraudulent activities that could occur during an online transaction.
Many payment gateways also come equipped with features like recurring billing cycles, virtual terminal integration with websites, easier organization of customer records, etc.
Some payment gateways offer you the option of getting a merchant account as part of the package, while others provide gateway-only services.
Features of Merchant Service Providers
Merchant Service Providers offer a range of features that help businesses accept customer payments.
Merchant Account
A merchant account is an essential feature of a merchant service provider as it acts as a middleman between your customers and issuing bank accounts.
When you have established a merchant account, you will receive an ID number which helps protect against fraudulent activities that may occur during debit or credit card transactions. The money from payments made by customers with payment cards is stored in the merchant’s account before they are deposited in your business’ bank account.
Merchant accounts are typically created in partnership with an acquiring bank, allowing them to manage all aspects of the payment transaction, including authorization, settlement, and reconciliation.
Credit Card Terminals
A credit card terminal is a device that enables merchants to process payments from customers using their credit cards. They are available in in-person and virtual formats, making them suitable for businesses of all sizes and types.
Physical or in-store terminals can be connected to a merchant’s point-of-sale (POS) system or used as a stand-alone device, while virtual terminals are typically for online stores accessed through a portal or app.
Credit card terminals allow merchants to accept almost any payment, including MasterCard, Visa, American Express, Discover, and more. Depending on the terminal, they can also accommodate contactless payments and those made via smartphones.
Merchant service providers will typically offer physical and virtual terminals and other services, such as secure payment processing systems and fraud prevention measures. This can help businesses reduce the risk of fraud and ensure that all transactions are carried out safely and securely.
Additionally, some providers offer integrated software solutions so merchants can track sales history and manage inventory more efficiently.
Some of the features available with more comprehensive terminals include:
- Contactless payments (Apple Pay)
- Security measures like PINs or chip readers
- Support for different payment methods (cash, check, debit/credit cards)
- Integration with existing POS
- Smartphone compatibility (for mobile payments)
- Record-keeping capabilities that track sales data and customer orders
Point-of-Sale (POS)
Point-of-sale systems are computerized solutions that provide a way to accept customer payments. Typically, POS systems are used in retail settings, including stores and restaurants.
A POS system typically consists of a computer terminal with a screen, a barcode scanner for scanning items, a receipt printer, and sometimes other components such as a credit card reader, swipe machine, or cash drawer.
POS systems enable merchants to securely authorize customer payments using EMV Chip technology, contactless payment solutions, or magstripe cards. Many POS systems also have the ability to accept digital wallets like Apple Pay and Google Pay, which can help to reduce time spent at checkout and increase sales potential.
Here are some of the things that point-of-sale systems do:
- Process credit or debit card payments or other forms of customer payments
- Automate several tasks, i.e. automatically calculating the tax on purchases and tracking inventory levels in real-time
- Store customer information such as contact details and purchase history, allowing businesses to personalize their services and send targeted promotions or discounts to their customers
- Allow direct integration with payment processors so payments can be processed quickly and securely without manually inputting card details
- Generate detailed reports about sales performance and customer behavior
Some POS systems also come with additional features like loyalty programs or gift cards, which help businesses build relationships with their customers over time and increase repeat business.
Additionally, most POS solutions come with advanced analytics and data tracking tools, allowing businesses to understand their customers’ purchasing habits better.
Payment Gateways
Payment gateways connect merchants and banks, enabling secure online payment transactions. They serve as an alternative to a credit card terminal.
By connecting your service provider’s payment networks with your website or e-commerce store, these gateways allow you to accept payments over the internet securely. They encrypt sensitive customer data during transmission so it cannot be read or intercepted by malicious third parties.
Additionally, they can authorize payments instantly and store multiple payment methods on file for recurring billing or subscription-based payment processing.
Payment gateways also provide detailed analytics about each transaction which helps merchants better understand their business performance over time.
You may need to pay a monthly fee for a payment gateway as part of a merchant account or payment service provider’s package—and on top of payment processing fees.
How to Choose the Right Merchant Service Provider
Choosing the best merchant service provider for your business can be daunting, with several options available. But if you know what to look for, you can ensure you get the best deal and the most reliable service.
Here are a few things to consider when selecting a merchant service provider:
Fees and Pricing
When selecting a merchant service provider, understand precisely what you’ll be paying for each transaction and how that cost is calculated. Depending on the type of business, different payment processing options may be more beneficial than others.
For example, subscription-based businesses may benefit from providers that offer membership fees or interchange plus plans, while small business owners may find flat-rate pricing more cost-effective.
Some merchant service providers offer tiered pricing structures with variable transaction rates based on sales volume.
Additional fees may be added, such as chargeback fees, early termination fees, credit card surcharges, or gateway fees.
Consider the total cost of ownership, including all associated costs such as application or set-up fees. Different payment processors also have varying payout cycles and hold times for funds to become available.
Additional features like fraud protection services can help protect your business from losses due to fraud—but they can come with an additional charge.
To make an informed decision about the most suitable provider for your business, it’s essential to read through the terms and conditions and identify any hidden charges or extra payments for using their services. Seek out customer reviews. Research multiple providers thoroughly to compare the different pricing options.
Ease of Use
Your choice of merchant service provider should be based on how easy it is to use their platform.
Does it have intuitive user interfaces online and via mobile applications? Are customer support services reliable and accessible? Does the provider offer detailed instructions and onboarding for various tools and features?
Make sure that the provider you select offers a streamlined system that employees with minimal technical knowledge can easily navigate.
The last thing you want is to waste time figuring out how to operate the software. This can lead to delays in processing payments, which affects customer satisfaction and your bottom line.
Features
Explore all the features offered by different providers before making your final decision. Merchant service providers typically offer various services tailored to different types of businesses. Ensure you find one that offers features specific to your online products or services.
Look for additional features, such as automated payments or recurring billing options, which can help streamline processes further and make things easier for everyone in your organization.
Choose a merchant service provider that offers an easy-to-use payment gateway or can easily integrate into various gateway options. Streamlining the entire payment process will allow customers to make quick, secure payments without spending time learning how to navigate a complicated payment experience.
Other User Reviews
Take some time to look over customer reviews from past users to get an accurate picture of how reliable they are and what kind of experience other users have had with them. This will give you an idea of whether they’re an ideal fit for your business needs.
Security
Security is always paramount when handling financial transactions online, so your chosen merchant service provider must take appropriate measures to protect customers’ sensitive data. Ensure that the provider uses up-to-date encryption technology and provides safe authentication methods like two-factor authentication.
Seek out providers that have achieved PCI compliance. A reliable merchant service provider should also offer tokenization, fraud prevention, and 3D Secure authentication.
Von Payments Can Help With Your Merchant Service Needs
A merchant service provider is a company that provides payment processing and related services to merchants. This can include credit card processing, check processing, fraud protection, and other financial services that help businesses accept payments from customers and clients.
For businesses looking for a reliable merchant service provider that can provide innovative solutions tailored specifically to high-risk businesses, Von Payments is a perfect choice. With cutting-edge technology, expert customer support, and professional advice, you can trust Von Payments to keep your business running smoothly without any hassle or worry about payment or fraud.
Get in touch with us today for your merchant service needs.