In general, merchant services refer to the services a company utilises to receive and process payments, also known as merchant processing, which covers a wide range of financial services for businesses. However, the word “merchant services” can also refer to the back-end procedures used by businesses to accept payments, the organisations that these firms partner with for this reason, as well as the gear or software used in this process.
Because it covers a wide range of financial services and procedures, the word “merchant services” might be difficult to understand. Traditionally, “merchant services” refers to taking credit card payments. The definition has now been expanded to include all of the many firms, technologies, and payment processing strategies that your business uses. Building your knowledge about merchant services is crucial if you want to select the best provider for your company as a business owner.
What Are Merchant Services?
The technologies and services that a company employs to receive and process payments are referred to as merchant services. This definition can be further broken down into the following elements:
How merchant services work: The behind-the-scenes activities that are required for a firm to take and accept a payment.
The technology, including gear and software, that business owners may require to accept and process payments is one of the tools involved.
Companies that offer these services to business owners are known as merchant service providers.
Pricing: How do prices for goods and services work? How much might they cost for small businesses?
How Merchant Services Work
When a client gives you their credit card for merchant services, the transaction starts, and it concludes when the money is transferred into your company’s bank account. Your payment methods, accepted payment types, and service provider are all determined by your merchant services.
The steps that make up a transaction procedure typically are as follows:
- You either swipe or key in a customer’s credit card number at a credit card processing terminal.
- The payment processor sends this information and verifies it with the customer’s bank before approving or rejecting it.
- If the customer’s bank approves the transaction, you may accept the charge via your terminal, and the transaction will be complete.
- The payment processor deposits the remaining funds into your merchant account after deducting its fees, which we’ll talk about later (the bank account needed to accept credit card charges).
Merchant Service Products
As we already mentioned, the way you accept payments, the kinds of payments you accept, and the provider you work with will all have an impact on your merchant processing.
The many technologies that let companies accept and process payments from clients are thus the second crucial component of what constitutes “merchant services.”
Payment Gateways
The programme that integrates with your website or online business and enables you to accept and process safe credit card payments online is known as a payment gateway. In essence, the payment gateway replaces the credit card terminal in the procedure we just outlined.
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Credit Card Terminals
When receiving cash payments in person, on the other hand, a credit card terminal is a machine that enables you to physically swipe, dip, or touch a credit card. The process necessary for you to accept, validate, and process payments will be facilitated by this device’s connection to your merchant service provider.
From basic magstripe swipers to portable terminals, there are many different sizes and shapes of credit card terminals.
Other Forms of Payments a Gateway Handels
A payment gateway can hendel payment forms other than credit cards. It may accept ACH, EFT, Interac, Visa Debit, and more.
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ACH
Automated Clearing House, aka ACH network. An ACH is an eFund transfer between banks and credit unions in the United States. ACH is used for all fund transfer transactions, including direct payroll deposit and monthly debits for routine payments.
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EFT
Electronic Fund Transfer, EFT. Like ACH in the US, EFT payments affect the movement of funds from a bank account to another electronically within Canada.
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Interac
Interac is the Canadian interbank network that connects financial institutions and other organizations to exchange electronic financial transactions. Interac is the Canadian debit card system and the principal fund transfer network through its e-Transfer service.
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Visa Debit
A Visa debit card is a card associated with a deposit account rather than a line of credit. Debit cards are not credit cards, so they don’t require credit checks.
