What Are Merchant Services for Small Businesses?

Merchant services are crucial for any business owner, whether you’re in online sales, brick-and-mortar or anywhere in between. Merchant services help businesses collect payments in a variety of ways, including point-of-sale, online and mobile, as well as assisting with keeping transactions and customer data secure. 

A merchant service provider can be an absolute lifeline for a small business. While large companies have the economy of scale and can negotiate various aspects of what merchant service providers offer, small businesses are stuck with what a particular provider already allows. That’s why it's crucially important for small businesses to select the merchant services provider that fits the size of their shop, the type of business they do and specializes in the tools they need to succeed. 

Here, we’ll take a look at what merchant services actually are for small businesses and why selecting the correct one for your small business is so important. Plus, we’ll share one foolproof way that you can ensure you get the right provider.

Looking for help on finding the right merchant services for you? Book a free consultation with Swipesum today!

What is a merchant service provider?

Small business owners often think that they’ve got a store and a bank account; when customers buy something, their bank sends money to the business owner’s bank and bang, boom, we’re all done. Unfortunately, it's not anywhere near that simple. 

A merchant service provider, for lack of a better term, is your path to doing business with any customer that wants to use a payment card of any kind…so basically all of them. One of the most important things that merchant services providers do is to set your business up with payment processing capability. You may be asking, “doesn’t my bank do this? Can’t I just have them accept payments?” Well, not exactly and we’ll talk more about that a bit later.It’s important to recognize that merchant service providers specialize in processing the oodles of different payment options that will walk through your physical or digital door. This includes more mainstream options like Visa or Mastercards and standard debit cards. It also can include more specialized methods, like Venmo, PayPal or even crypto. 

Your merchant services provider helps you to manage all of this, generally by giving you…

  1. Payment Terminals - these are literally the “brick” card readers that work standalone or connected to a point of sale. These often come from Merchant Services Providers, while it’s worth noting most full Point of Sale systems do not. Remember, the number one thing a Merchant Services Provider would give you is a merchant account in order to accept payments. 
  2. Payment Gateways - if you do business primarily online, payment gateways are an absolutely must-have. Your merchant service provider may have its own payment gateway, where it manages the transaction flow between customers and merchants online, but it could also work with a larger company, like Elavon or Worldpay to help facilitate payments.
  3. Mobile payment - Customers are carrying fewer and fewer things in their wallets and this includes payment cards as well. With the advent of mobile payment options, there’s simply no need. Merchant service providers should be able to help you accept mobile payments of all kinds.
  4. Virtual terminal - Every now and again you’ve got a customer that simply wants to order one of your products and pay for it over the phone. It’s often faster and easier than navigating a website, so who blames them right? Merchant service providers should be able to offer you a virtual terminal that will allow you to manually take payments over the phone.

Your resource

Your merchant service provider should also serve as a resource for your business. After all, they have a vested interest in your success. Merchant service providers are paid in many different ways but one of the most common is a per transaction fee. The more transactions you have and the higher the dollar amounts of each one, the more the merchant service provider gets paid. As a small business owner, you need all the help you can get to ensure that you’re competitive.

Your merchant services provider should be deeply engaged in your business, offering products and services that can help you serve your customers better.

Your security

Merchant services providers also offer key security features for your business and its payment systems. This is good for your customers, no doubt, which leads to positive interactions for you as well. You should ensure your merchant services provider has and you fully understand the security measures being taken on your behalf. 

Your dashboard

Merchant services providers get to peek at every single transaction your business makes. With access to all that information, they really should be able to tell you something about your customers. Most merchant service providers will provide you with all the metrics you need to develop KPIs and enhance your business offering. 

Doesn’t my bank do this?

The simple fact is your bank is good at a lot of things, but it doesn't specialize in merchant services. However, they may offer "merchant services" and send you to another provider where they are compensated for that lead. The kinds of relationships and connections required to facilitate all the various payment methods and tools is staggering. It takes a specific company to make it all work. On the surface it may seem simpler to have your bank perform these duties but in reality it’s not. Merchant service providers allow you to leverage the expertise that comes from honing in deeply on a specific set of activities. The most crucial thing here is customer support. It’s highly likely that at some point, you’ve sat on hold for an extended period with your bank. Merchant service providers pride themselves on customer service making it quick and easy to talk to someone and get your problem solved. 

So which one is right for me?

You have to think carefully about the size and kind of business you have. Remember, a merchant service provider should match what you do. Make sure they’re setup to support the size of your business as well as the kind of business you have. Some merchant service providers are better than others at, say, brick-and-mortar operations than they are at online-only stores.

Whether you need help selecting a merchant service provider or want to take your existing relationship to the next level, Swipesum can help. Our tools help you grow your business, keep more of your money and increase the transparency of your operations with your merchant services provider. From optimization to chargeback consulting, Swipesum is the key to unlocking your business’ potential.

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Michael Seaman

Michael Seaman

Michael is the co-founder and CEO of Swipesum. A veteran of the payments industry, Michael and his brother Stephen have led Swipesum since its inception in 2016. In his free time, Michael enjoyes time with his three children.

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