As the name suggests, merchant services are the various tools and support mechanisms that businesses can use to accept card-based payments. This can include payment gateways, POS systems with hardware and software, and other equipment and tools that help businesses confidently and securely take credit and debit card payments from their customers.
What is meant by merchant services in banking?
A merchant services provider acts as an intermediary between the bank, a business, and their customers by holding the funds collected from transactions under their own “blanket” account before transferring them to a merchant’s individual business bank account. This process can take up to 48 hours, and some companies also offer cash advance services that can get the funds to a merchant’s bank account even faster.
The other main component of payment processing companies are the processor that manages the movement of transaction data in and out of a business’s merchant account and payment gateway. This can be done in person via point-of-sale terminals or a card reader, and online through websites and e-commerce tools. This includes the technology that supports contactless payments, such as Apple Pay, Google Pay, Fitbit, and other mobile wallets, and even the technology used by friends and family to send money through apps like Venmo or PayPal.
It’s important for businesses to understand what they want and needs from their merchant services providers before selecting one. Understanding what they’re paying for will help them avoid surprise fees that can add up and impact their bottom line. The most common merchant service fees are payment processing fees and per-transaction charges, and they can vary widely from one provider to the next.