What are Merchant Services | Utilityfair

30-Second Overview

Merchant services encompass a range of financial solutions that enable businesses to accept payments from customers through various channels, including credit and debit cards, as well as online payments. These services typically include payment processing, card terminals, POS systems, and support for e-commerce transactions. Choosing the right merchant services provider ensures smooth payment processing, secure transactions, and a better customer experience.

What Are Merchant Services?

Merchant services refer to the suite of financial tools and solutions that help businesses accept and process payments from customers. They cover both in-store and online transactions, enabling businesses to receive money securely and efficiently.

Common merchant services include:

Payment processing for credit and debit cards.
Point-of-sale (POS) systems.
Payment gateway integration for online sales.
Card readers and contactless payment terminals.
Fraud detection and secure transaction monitoring.

Benefits of Using Merchant Services

Faster and secure transactions
Expanded payment options for customers
Reduced cash handling and operational errors
Access to transaction reports and analytics

What is a merchant account?

Most business owners and managers are familiar with business bank accounts. What they might not be that familiar with is a merchant account. Merchant accounts are special types of bank accounts that can accept payments directly from debit cards and credit cards. Without a merchant account, you can’t process card payments as you have nowhere to deposit the money.

Who are the Key Players?

While card payments might seem simple – swiping your card takes just a few seconds - there are a lot of parties working together behind the scenes :

A business (the “merchant”).
Their customers.
The merchant’s bank (the “merchant service provider”).
The customer’s bank (the “issuing bank”).
A payment network (Worldpay, First Data, etc.).
A card association (Visa, Mastercard, American Express/Amex, for example).

For the card payment to be successful, every single one of those parties has to work together to ensure an efficient service for the customer and an effective service for the client.

Let’s look at a few specific merchant service products and services to understand what makes up the ecosystem.

Types of Merchant Services

Businesses can choose from various merchant services depending on their needs:

In-Store Payment Solutions

POS systems for tracking sales and inventory
Card terminals for swipe, chip, and contactless payments

Online Payment Solutions

Payment gateways to accept payments on websites or mobile apps
Recurring billing for subscription-based businesses

Mobile Payment Solutions

Mobile card readers for on-the-go payments
Contactless and digital wallet options

A Point of Sale (“POS”) system

Most modern POS systems are EPOS (electronic point of sale) systems, which integrate with a raft of external business systems like stock management, marketing platforms and accounting systems.

Although most EPOS systems are sold as one package, there are two separate elements to think about: hardware and software.

POS Hardware

This includes all the ‘kit’ you need to set up a POS system :

POS screen: this is the input and output device. In some cases, this can be a tablet such as an iPad or, even, a smartphone while in others, it’s a larger touchscreen monitor.
A card terminal is the physical device that captures your customer’s card data and verification data and accepts your customer’s credit card or debit card. Card terminals work by reading the data stored on a customer’s card, accepting their PIN and then sending the information to your POS system or directly to your acquiring bank. The ‘chip and pin’ adds to the security of the transaction. These terminals may operate on a WiFi/Bluetooth connection or may, in some cases, need a separate connection.
A card reader is a small, battery-powered device that pairs with a mobile device (iPhone, iPad, etc.) to allow you to accept payments. Card readers usually operate on a pay-as-you-go basis, where business owner buys the reader outright and only pay transaction fees when they accept payment. Common manufacturers include iZettle, SumUp, Square and PayPal.

While you can buy POS components separately, most merchants opt for a pre-built package from an acquirer to ensure everything works together.

POS software

The software running on the POS can be divided into two types: on-site and cloud.

On-site: Traditional on-site POS software is installed on a local computer. Unless you have a maintenance agreement, it’s your responsibility to update and maintain the software.
Cloud: Cloud POS software runs on a remote server operated by the merchant service provider. Because the software is managed by the provider, you don’t have to worry about updates or maintenance.

What is an E-Commerce Platform?

This allows businesses to accept online payments. This piece of software is the equivalent of a shop’s POS system. You use it to set up products, manage stock, queue up transactions and so on. However, unlike POS systems, e-commerce platforms are used by the customer and not the merchant.

There’s a huge amount of choice with e-commerce platforms, ranging from all-in-one systems through pre-built frameworks to fully bespoke e-commerce platforms.

Once you’ve got your platform sorted, you’ll need a payment processor.

What is a Payment Gateway?

At a very basic level, all a payment gateway does is accept a customer’s card details (and verification details) then bundle the data up and send it off to the merchant service provider.

Obviously, that’s simplifying the matter a bit but that’s the general story.

Your payment gateway also has to integrate with your e-commerce platform, encrypt all the data and wait for the response from the bank.

How do I get the cheapest merchant services?

You have three choices :

Take the first provider that comes in your door. The wrong deal can be very expensive.
Spend a lot of time researching, checking and trying to negotiate. This can be very difficult and frustrating as providers present pricing differently across several card types.
Use Utilityfair to do all the hard work, create a comparison based on a single rate view and compare to the cost of your current merchant service provider

When helping you select a merchant services provider, our experts consider: