As a small business owner, you know that accepting credit and debit cards is essential to growing your business. But you may not know where to start when it comes to finding the right merchant services provider.
There are a lot of options out there, and it can be tough to figure out which one is right for your business. To make the process easier, we’ve put together a detailed guide to help you find the best merchant services for small businesses.
In this guide, we’ll cover:
- The different types of merchant services providers
- The basics of credit card processing
What to look for in a merchant services provider?
By the end of this guide, you’ll have a good understanding of the merchant services landscape and be able to choose the best provider for your business.
Let’s get started!
What are Merchant Services?
Merchant services are simply the facilities that allow businesses to accept credit and debit card payments. This can be done in-person, online, or over the phone.
Merchant services providers (MSPs) are the companies that offer these facilities to businesses. They will set up a merchant account for your business and provide you with the necessary equipment and software to take card payments.
There are a few different types of MSPs, which we’ll cover in more detail below.
Types of Merchant Services Providers
There are three main types of merchant services providers: banks, independent sales organizations (ISOs), and payment service providers (PSPs).
Banks are the most traditional type of MSP. They’ll usually offer merchant services as part of a wider suite of business banking products.
The main advantage of using a bank is that you can bundle your merchant services with other products, such as a business checking account or loan. This can be helpful if you already have a good relationship with a particular bank.
The downside of using a bank is that they tend to be more expensive than other types of MSPs. They’re also not always the most flexible when it comes to customizing your merchant services package.
Independent Sales Organizations (ISOs)
ISOs are third-party companies that partner with banks to provide merchant services. They’ll usually have a more robust suite of products and services than banks.
ISOs tend to be a good option for businesses that need more flexibility and customization in their merchant services package. They can also be a good choice if you’re looking for lower prices.
The downside of using an ISO is that they’re often less well-known than banks. This can make it harder to find information about them and their products.
Payment Service Providers (PSPs)
PSPs are third-party companies that provide merchant services without partnering with a bank. They’re usually the most innovative and technologically advanced type of MSP.
PSPs tend to be a good option for businesses that need the latest and greatest in credit card processing technology. They’re also generally more affordable than banks and ISOs.
The downside of using a PSP is that they may not have the same level of customer service as a bank or ISO. They also may not offer as many features and benefits.
Now that we’ve covered the different types of MSPs, let’s take a look at the basics of credit card processing.
The Basics of Credit Card Processing
In order to accept credit and debit card payments, businesses need to set up a merchant account with an MSP. This is a special type of bank account that allows businesses to accept card payments.
When a customer pays with a credit or debit card, the funds are first transferred from the customer’s bank to the merchant’s bank. The merchant’s bank then deposits the funds into the merchant’s account. This process is called “acquiring” funds.
Once the funds are in the merchant’s account, the MSP will deduct a fee for processing the transaction. This fee is called the “merchant discount rate” (MDR). The MDR can vary depending on the type of card used, the size of the transaction, and the MSP.