Merchant Services Explained

In financial services, merchant services are the aspects of a financial transaction carried out between a business and a paying customer at the purchasing point of the goods and services. It is also categorized by the means a paying customer will pay for the goods and services available like the use of a credit or debit card where a card machine is available, at a sale system point or online purchasing.

For a business to process a customers payment transaction, it will need to first set up a Merchant Account with a reputable Merchant Services Provider that will enable the transfer of money between a customers bank account and the business bank account automatically without any personal details having to be shared.

How Do Merchant Services Work?

Merchant services are termed as credit card processing which is the process of managing and authorizing the payment transaction between a customer and a business. For this to be successful, the merchant services will undergo a process;

  • The customer’s payment information collection
  • The customer has to be authorized whether he can make payments to the business or not.
  • The amount finally is deposited into the business bank account.

The actual authorization is the most important part of the payment transaction for the best merchant services for small business. At this stage, there is a keen review of any inability or fraud of the customer to have access to enough funds to purchase the goods and services. The type of payment offered by a customer and the type of machine used to carry out the payment transaction determines the kind of authorization process to be carried. A customer may intend to use a MasterCard or a visa. After this part of the process is declared successful, an authorization code is sent to the provider of the customer’s payment. The provider proves it is genuine before sending it on to the business bank account. This process is complete after the code passed through the card machine, the online system or the point of sale.

Why Do Merchant Services Exist?

The most fundamental part is merchant services during the process of payment transaction between a business and the attended customers. The element of trade is most important because it enables a seamless, real-time and safe money transfer from a customer account to the business account. The card transaction between the customer and the business is characterized by four different elements of interaction;

1. The business to which the money is sent to

2. The bank used by the customer to send the money

3. the bank that will receive the funds

4. And finally, the customer sending the money.

The merchant service provider has the responsibility of making sure all these elements are well linked successfully without any inconvenience, failure to which there will be not good and services delivered.

How are Merchant Services Funded?

For merchant services to be available between the business and the customer, a small transaction fee is taken by each account provider from any transaction made to cover the expenses of the whole process. These fees differ depending on the merchant service provider and the target interchange fee from the transaction amount. Therefore what business receives will be less the customer’s payment due to the interchange fee charged before the money reaching business bank account.

Merchant services are important to any financial service success. Businesses which don’t consider these services end up failing due to complications. Always consider merchant services when doing business.