What Are Business Merchant Services?

Imagine you want to buy a toy from a friend. You give them a dollar bill, and they give you the toy. It’s simple. But what if your friend lives far away? What if you want to pay with a credit card on a website? Or with your phone by just tapping it? That simple act of giving money becomes more complicated. 

This is where business merchant services come in. Think of them as a helpful team that ensures a business can get paid, regardless of how the customer prefers to pay. This guide provides a clear and straightforward explanation of these valuable services.

What is a merchant?

The word “merchant” might sound old-fashioned, like someone with a ship full of spices from faraway lands. And that is actually where it started! A merchant is simply anyone who sells goods or services to make a living.

So, if you have a business, you are a merchant. It does not matter how big or small your business is.

• The giant department store downtown is a merchant.
• The person selling homemade candles at a weekend market is a merchant.
• The taxi driver is a merchant, selling rides.
• The plumber who fixes your sink is a merchant, selling their skill and time.
• The huge website where you buy books and gadgets is a merchant.

A merchant is another word for a seller. It is a helpful term because it encompasses everyone, from a single person with an online shop to the largest companies in the world.

What Are Merchant Services?

Merchant services are the collection of tools and services that allow a business to accept electronic payments. Think of them as a bridge. On one side of the bridge is your customer, ready to pay with a card, a phone, or an online cart. On the other side is your business bank account, waiting for the money. 

Merchant services are the strong, safe bridge that connects the two. When a customer pays with a card, many things happen in just a few seconds. The merchant services are working hard during that time. They verify that the customer’s card is genuine and has sufficient funds. 

They obtain permission to process the payment, guide the money through the banking system, and ensure it is deposited safely into the business’s account within one to two business days. For companies looking to grow, renowned agencies like CallingAgency provide qualified merchant service leads, connecting them with potential clients who need reliable payment solutions.

These services are not just one thing. They include:

• The little machine on the counter where you swipe, insert, or tap your card (a card reader).
• The online “checkout” page on a website (a payment gateway).
• The special bank account that holds the money for a short time before it moves to your main account (a merchant account).
• The software that helps you track all your sales.

In short, merchant services handle all the complicated aspects of electronic payments, allowing business owners to focus on what they do best—running their business and helping their customers.

How do merchant services differ from a merchant account?

This is a ubiquitous question because the terms are often used in conjunction with each other. It is like the difference between a car and its engine. They are related, but one is part of the other. A merchant account is a special type of bank account. Its only job is to hold onto the money from your card sales temporarily. When a customer pays with a credit card, the funds do not go directly into your regular business checking account. 

It goes into the merchant account first. It sits there for a day or two while all the details are confirmed. Then, it is sent to your primary bank account. Think of the merchant account as a secure, middle-step mailbox for electronic payments. Merchant services is the bigger picture. It is the entire system. 

The merchant account is just a critical part of that system. Merchant services also include the card reader, the payment gateway for online sales, customer service support, and the software that tracks your sales. To keep it simple, you get merchant services to accept payments. As part of those services, you will typically need a merchant account to receive the funds.

Types of Business Merchant Services

There are different tools for different types of businesses. A restaurant needs something other than a website that sells music lessons. Here are the main types of services available.

1. In-Person Payments (Point of Sale or POS)

This is for businesses where customers come to them. Think of a grocery store, a coffee shop, or a hair salon. The service here refers to the physical terminal or system used to process payments.

• Countertop Terminals: The familiar machine that sits on a counter where you swipe or tap your card.
• Mobile Readers: Small devices that plug into a smartphone or tablet. This is ideal for vendors at a fair, food trucks, or delivery personnel who need to accept payments on the go.
• Complete POS Systems: These are bigger setups that include the card reader, a cash drawer, a receipt printer, and software to manage inventory and track sales.

2. Online Payments (E-commerce)

This is for businesses that sell products or services online. Since there is no physical card to swipe, they need a different tool.

Payment Gateways: This is the virtual version of a card reader. It is the secure page you see when you “check out” on a website. It collects the customer’s card information and encrypts it to ensure its security as it is transmitted to the bank. Popular examples include Stripe and PayPal Checkout.

3. Telephone Payments (Mail Order/Telephone Order or MOTO)

Some businesses take orders over the phone. For this, the business owner needs a secure way to type the customer’s card number into a system. Merchant services offer virtual terminals for this purpose. It is similar to a website where the merchant logs in and securely enters their payment details.

4. Recurring Billing

This is for businesses that charge their customers on a regular schedule. Think of a gym membership, a monthly subscription box, or a weekly utility bill. Merchant services can be set up to automatically charge the customer’s card each month, eliminating the need for manual action on the customer’s part.

5. Security Services

Since money and information are constantly moving, security is crucial. Merchant services include features such as encryption (scrambling data so that it cannot be read) and fraud prevention tools to help protect both the business and its customers from scams.

How to Choose the Right Merchant Services Provider

Picking the right company to provide these services is a big decision. The wrong choice can cost you money and cause headaches. Here are some simple things to think about when you choose.

Step 1: How Do You Sell? 

First, think about your business. Do you primarily sell in-store? Then you need a good, reliable card machine. Do you only sell online? Then, look for a provider with an excellent payment gateway. Do you sell both in-person and online? Find a provider that can do it all.

Step 2: Understand the Costs

This is very important. The fees are not always simple. You will often pay a small percentage of each sale, plus a small fixed fee. Some providers charge a monthly fee for using their service. Ask lots of questions. “Are there any hidden fees?” “What is the fee for a keyed-in card versus a tapped card?” Be sure you know what you’re paying for.

Step 3: Check the Contract

Some companies ask you to sign an extended contract, maybe for two or three years. Others are month-to-month, which gives you more freedom to leave if you are not happy. Think about what feels right for your business.

Step 4: Customer Support Matters

What happens if your card machine stops working on a busy Saturday? You need help right away. See if the provider offers 24/7 customer support. Read reviews to see what other small business owners say about their service.

Step 5: Think About Growth 

Choose a provider that can grow with you. Maybe you only have a small market stall today, but you dream of having a store and a website next year. Select a service that can accommodate new tools as your business expands.

Future of Business Merchant Services

The way we pay for things is constantly changing. Merchant services will also change to ensure everything remains secure and straightforward. Here is what might be coming next.

• Paying with Your Body: Technology is making payments even faster. We already tap our phones. In the future, we might pay by scanning our fingerprint or even our face at the checkout, which would significantly reduce wait times.
• Better Security: As thieves become more sophisticated, security becomes stronger. Future systems will employ even more effective methods to verify that it is really you making a purchase, thereby making fraud much more complicated.
• Connecting Everything: Your sales system, accounting software, and customer email list can all work together smoothly. This will save business owners a lot of time.
• More Ways to Pay: New forms of money, such as digital currencies, may become more prevalent. Merchant services will need to adapt so that businesses can accept these new payment types if their customers want to use them.

The main goal will always be the same. To make buying and selling as easy and safe as possible for everyone.

Conclusion

Ultimately, business merchant services are all about saying “yes” to your customers. They are the invisible helpers that work in the background, turning a customer’s “I want to buy this” into money in your bank account. They handle the complex world of electronic payments, so you don’t have to.

FAQs

Who Offers Merchant Services?

Many businesses offer merchant services worldwide. Even banks often provide merchant services. Companies like Helcim, Square, Stripe, Stax, and many more offer merchant services, allowing you to research and find the type of service you need.

Can Small Businesses Use Merchant Services?

Absolutely! In fact, merchant services are essential for small businesses. They level the playing field. A small bakery can look just as professional as a big chain store by accepting credit cards. Many providers offer plans specifically designed for small businesses, featuring low costs and simple equipment that works with a phone or tablet.

Are Merchant Services and Payment Gateways the Same?

No, they are not the same, but they are related. A payment gateway is just one part of merchant services. It is the tool used for online sales. Merchant services is the whole package that includes the gateway, the merchant account, and other tools for both online and in-person sales.

Can I Accept International Payments With Merchant Services?

Yes, you can! Most merchant service providers can handle payments from other countries. This is a great way to grow your business. However, it is essential to tell your provider that you plan to do this. There may be different fees for international cards, and you will need to ensure your website or system is set up to handle various currencies.

Do I Need a Business License to Get Merchant Services?

Most of the time, yes. The provider needs to know they are working with a real business. A business license is a common way to prove this. If you are starting as a sole proprietor, you can initially use your personal Social Security number. However, it is always best to check with the provider directly about the specific documents they require. Having a formal business license often makes the process smoother and more efficient.