In the merchant services space, a merchant is any person or business that accepts payments from customers for goods or services. Merchants typically accept payments with support from third-party merchant service providers.
If you run a business, it’s important to find the best merchant services for your company’s needs. There are a lot of merchant services providers, and choosing one isn’t always intuitive. Below, we’ll explain what merchant services are, what features they include, and how to choose the best provider for your business.
What's in this article?
- What are merchant services?
- What’s the difference between merchant services and a merchant account?
- What’s included in merchant services?
- How much do merchant services cost?
- Who offers merchant services?
- Key factors to consider when choosing a merchant service provider
- How Stripe Payments can help
What are merchant services?
“Merchant services” is the umbrella term for various payment-related business support services and equipment. From payment processing to point-of-sale (POS) systems, these services are crucial for businesses that engage in retail, ecommerce, or any other form of commercial activity where payment transactions are involved. Provider offerings vary and are usually tailored to each merchant, depending on its needs.
No matter which services and support mechanisms are included, merchant service providers help businesses accept payments from customers as efficiently as possible.
What's the difference between merchant services and a merchant account?
While merchant services and merchant accounts are both involved in processing payments for businesses, they aren't the same. Here's what each one entails.
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Merchant account |
Merchant services |
|---|---|
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A dedicated account that allows a business to accept electronic payments |
A suite of tools and services that support payment processing |
|
Temporarily holds funds from card and electronic transactions |
Manages how funds move in and out of merchant accounts |
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Separate from a business’s regular bank account |
May include ecommerce tools, loyalty programs, and reporting |
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Focuses on where money is stored before settlement |
Focuses on how payments are processed and managed |
What’s included in merchant services?
Merchant services are constantly changing to match the needs of businesses. Below are a few of the services most commonly included in a merchant services offering:
Payment gateways: A payment gateway is an interface that allows customers to securely submit payment information online, including credit and debit card numbers, that is then routed to the merchant’s payment processor. In person, this same mechanism happens through point-of-sale terminals and card readers.
Online transaction processing: Merchant services typically include online payment processing—everything that happens with a transaction after the customer enters payment information into the payment gateway. Your bank and the customer’s bank communicate with each other, and the merchant service provider moves the money where it needs to go.
Point-of-sale (POS) systems: POS systems consist of both hardware and software that allow businesses to accept payments and complete transactions in person, along with providing functionality for tasks such as updating inventory and tracking sales.
Credit card readers: Merchant service providers use credit card terminals to process in-person transactions. Card readers can be stand-alone devices, components within a POS terminal, or an attachment to a merchant’s mobile device like a phone or tablet.
Ecommerce support: Merchant service providers have recently started supporting businesses in more holistic ways. For example, they might offer ecommerce businesses the ability to build and customise a website or marketplace for their products, marketing tools, or sales analytics.
Cheque processing, gift cards, and loyalty programs: Many merchant service providers offer additional features, such as cheque-processing, gift cards, or loyalty programs. Businesses can use gift cards to secure additional revenue for their business. Loyalty programs, sales, and seasonal promotions can help businesses generate better customer engagement, retention, and lifetime value (LTV).
Partner networks: Merchant service providers aren’t just diversifying their offerings; they are building networks of third-party providers that offer additional services that integrate with their own suite of products and services. For example, a business using a provider's ecosystem might manage payments, payroll, inventory, and ecommerce all through one connected platform.
No matter which services they are offering, a merchant service provider’s most important job is ensuring that every payment is accepted and processed smoothly and securely.
How much do merchant services cost?
Costs vary depending on the provider that you select and which services you need. Merchant service providers structure their fees in multiple ways, including:
- Flat monthly rates
- Per-transaction fees
- Tiered pricing structures, with different features and services included at different price points
There are also often fees for hardware and initial setup.
Who offers merchant services?
There are a lot of merchant service providers. They broadly fall into the following categories:
Banks: Major banks such as Wells Fargo, Chase, Bank of America, JPMorgan Chase, Citigroup, U.S. Bank, and Capital One all offer merchant accounts and related services.
Payment providers: Companies that provide payment processing services, such as Stripe, also offer merchant services.
POS system providers: Providers of POS systems and POS hardware such as Stripe offer merchant services.
Ecommerce platforms: Some ecommerce platforms, including Shopify and WooCommerce, provide merchant services by integrating payment processing into the platform.
Key factors to consider when choosing a merchant service provider
The range of services and features offered by different providers varies. Here are a few questions to help narrow your options and find a provider that suits your business:
What do you need most from a merchant service provider?
Consider your business and list your top priorities. Common factors to help you determine this list are your current transaction volume, your projected growth, whether your sales are in person or online, and whether you’ll need help setting up a payment processing website. Also consider what you don’t need—what’s already working well for you and doesn’t need to be part of the scope of services you purchase?
What costs are involved?
Fee structures for merchant services vary, so make sure you understand the costs for each provider you’re considering.
Will its solutions scale with your business?
Switching providers can be difficult. Ideally, choose a provider that will be able to support your business as it grows and changes.
What kind of customer service does it offer?
Good customer service is key when problems arise processing customer transactions. And even when everything is working as it should, you’ll still have questions for your merchant service provider. Before committing, learn how you can reach them and their availability.
Do its tools integrate with yours?
Most providers pride themselves on being integration friendly, but you should examine everything your team uses and make sure there are no hidden compatibility issues with their software or hardware and your current tools.
Can you speak with current customers?
Most merchant service providers aren’t shy about touting the brands on their customer roster. It might be worth contacting a few of their clients to see what they’ve thought about the provider.
Merchant service providers are important partners in the task of processing payments. You’re going to place a huge amount of trust in them—so take your time and do your homework before committing.
How Stripe Payments can help
Stripe Payments provides a unified, global payments solution that helps any business – from scaling startups to global enterprises – accept payments online, in person and around the world.
Stripe Payments can help you:
- Optimise your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods and Link, a wallet built by Stripe.
- Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.
- Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalise interactions, reward loyalty and grow revenue.
- Improve payments performance: Increase revenue with a range of customisable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorisation rates.
- Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.
Learn more about how Stripe Payments can power your online and in-person payments or get started today.
The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.