The Importance of Merchant Services for Small Businesses

in Blog Post, Merchant Services, Small Business 17th August 2017

In this week’s blog post we discuss the importance of Merchant Services for small businesses in accepting card payments from paying customers…

What Are Merchant Services?

Merchant Services is a term used within the Financial Services Industry that refers to the aspects of a financial transaction that is made between a paying customer and the business where goods and services are being purchased.

This also includes the way in which a paying customer will pay for the goods and service, for example, using their credit or debit card at a card machine or point of sale system or even online.

In order for a business to be able to process a customers payment transaction, the business will need to set up a Merchant Account with a reputable Merchant Services Provider that will enable the transfer the money between a customers bank account and the business’s bank account automatically without any personal details having to be shared.

How Do Merchant Services Work?  

Merchant Services are often referred to as ‘Credit Card Processing’ and is basically the process of handling and authorising the payment between a business and a customer.

The Merchant Services process will include;

  1. The collection of payment information for the customer
  2. Authorisation that the customer can make the payment to the business
  3. The depositing of the payment into the business’s bank account.

The most important part of a payment transaction process is the actual authorisation; the stage at which any fraud or inability of the customer to access sufficient funds to pay for the goods and services is reviewed.

The Authorisation process for payment can vary depending on the type of payment used by the customer (e.g. Visa or Mastercard) and the type of machine used by the business to make the payment.

If this is part of the process is successful an authorisation code is sent to the customer’s payment provider who then sends it on to the bank account of the business.  The code is then sent through to the card machine, point of sale or online system to complete the process.

Why Do Merchant Services Exist?

Merchant Services are the most fundamental part of the payment transaction process between a business and its customers. It is the element of the transaction that enables the seamless and real-time safe transfer of monies from a customer account to a business account.

Every card transaction between the customer and the business involves interaction with four different elements;

  1. The business receiving the money
  2. The bank from which the money will be taken
  3. The bank to which the money will go
  4. And finally the customer.

Linking each of these elements successfully is the ultimate responsibility of the merchant service provider, and cannot currently be undertaken by any other means within the UK.

How are Merchant Services Funded?

In order for the Merchant Services to be available between the customer and the business, each account provider will take a small fee from any transaction made to cover the costs of the whole process. The fees can be different dependant on the Merchant Service Provider but are often made up of a percentage of the transaction amount usually known as an Interchange Fee.

What the customer will pay does not change but what the business bank account receives will be less as this includes the Interchange Fees being taken prior to the monies reaching their business bank account.

To find out more about the Merchant Services provided by Card Cutters why not visit our dedicated Merchant Services section or get in touch with us.

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