How To Choose A Merchant Services Provider

How To Choose A Merchant Services Provider (And What You Need To Watch Out For)

Introduction: A Merchant Services Provider is any company that provides payment processing services, such as accepting credit card and debit card purchases on behalf of consumers.

Who are Merchant Services Providers?

Merchant Services Providers fall into two main groups, those that provide processing services and those that provide payment services. Processing service providers take the financial information submitted by cardholders, process it through the appropriate payment networks, and settle the resulting transactions with Issuing Banks (or Acquiring Banks) on behalf of merchants.

Merchant Services Providers generally fall into 2 main categories: Payment Processing Services – The processing service providers are called Payment Service Providers (PSP). PSPs have no authority over issuing banks. They typically process credit, debit or other types of commercial card transactions using a variety of authorization methods such as presentment, authorization and capture.  In some cases they may even provide support for online/phone based payments.

Payment Services Providers – The payment service providers are called aggregators. Aggregators collect payments from consumers, usually as a fee for providing payment services. For example, a consumer may make purchases on behalf of her employer or service provider and the aggregator may receive the payment on her behalf. An aggregator then settles the transaction with an Issuing Bank, passing along the transaction information to do so when it completes acceptance of the credit card or other type of transaction.

Unlike processing services providers, payment service providers purchase transactions from Issuing Banks on behalf of merchants under contract. PSPs have the authority to settle with the Issuing Banks on behalf of their merchants.

What are Merchant Services Providers Responsible for?

Merchant Services Providers are primarily responsible for taking credit card and other types of electronic payments on behalf of their merchant customers. They provide merchants with the necessary hardware (PCI compliant terminal or secure internet connection) to accept card payment as well as software to process transactions. Processing services providers also provide ongoing support, settlement, and remittance.

What is a Merchant Account?

A Merchant Account is a contract between a merchant and an Issuing Bank that allows a business to accept credit card and other types of electronic payment through a merchant services provider.

Why should businesses become a merchant account holder?

You need a Merchant Account to: Accept credit card payments of all types (including online and telephone payments) through a merchant services provider.

  • Be able to receive payment of all types, including online and telephone payments.
  • Have the necessary hardware, software, maintenance and settlement support from the merchant services provider.

What does it take to become a merchant account holder?

Becoming a merchant account holder has nothing to do with your business’s financial ability to pay for the service; it’s about your business’s business operations and its relationship with your customers. Before your business can deal with an Issuing Bank, it must have the resources to accept payments for the goods or services it offers. This includes: A website for customers to use to purchase goods and services (if your business does not have a website you cannot be a merchant account holder)

Accepting credit cards as payment in-person (this may come in the form of accepting payments by cash, check or other types of in-person payment)

Accepting credit cards over the phone (this may come in the form of accepting payments by phone, fax or other types of telephone payment). If you do not accept credit card payments over the phone you cannot be a merchant account holder.

Who Are Credit Card Issuing Banks?

Credit card issuing banks are the financial institutions that extend credit to consumers in the form of credit cards. They are also known as acquiring banks or member services providers (MSPS). You can learn more about them here .

How Do I Become a Merchant Account Holder?

Before you start looking for merchant account providers, make sure your business has what it takes to qualify. If you don’t have the resources, you may need to request an exception from your merchant services provider. The exception process may involve you notifying your merchant services provider that your business has limited resources in terms of processing power and other factors.

Getting Approval:

When considering a Merchant Services Provider, there are several important things to consider. First, make sure that you understand the transaction costs involved in each option – both the annual fees and the percentage of payment cards processed. You need to understand what that means for your business, especially when determining which account to choose.

It is also important to ask whether or not the Merchant Services Provider has experience working with businesses such as yours. In some cases a listing on another website will tell you little about a company’s ability at understanding small-to-medium size businesses .

How to Negotiate with a Merchant Services Provider:

Once you have determined the features you want and the fees involved in each option, it will be time for negotiations. Before you start negotiating with a Merchant Services Provider, you should determine whether or not there are any exceptions available to make your business qualify for that type of account.


If your business is prepared to accept credit cards, there are many Merchant Services Providers that are ready to help. Your best bet is to start by seeking out a Merchant Services Provider directly using the resources in this article.

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