Despite the arrival of mobile payments, consumers still favor using credit and debit cards to make payments both in-store and online. This has been confirmed by the most recent Federal Reserve Payments Study (FRPS) released in December 2019. Total card payments grew to $131 billion with a value of $7.08 trillion in 2018 up $29.7 billion and $1.56 trillion since 2015. This means that card payments have grown at an accelerated rate of 8.9% per year by number and 8.6% by value from 2015 to 2018. The rate has steadily increased when you compare to the figures from the previous report which saw growth rates of 6.8% and 5.9% respectively.
With the introduction of newer technologies within the card payment industry, the value of remote general-purpose card payments nearly equalled that of in-person payments in 2018. This is in contrast to the expectations from the 2016 report which predicted that the market would drop to 46% by 2019. The only decline with card transactions within the payments industry is the number of ATM transactions made, however, the value of the cash withdrawn has continued to grow. This shows signs that the cashless society is no longer a thought of the future but rather a reality of the present.
This detailed guide will help you understand exactly what is meant by ‘merchant services,’ why the figures above are important to your business, and why you should be diligent on keeping up to date with industry statistics as they fluctuate year on year.
In short, merchant services allow your business to accept card payments from your customers. This is otherwise known as credit card payment processing. Our CardPointe platform was built to address all of your payment processing needs.
When a customer makes a payment for goods or services, this transaction undergoes a chain of 10 approval steps so the payment can be accepted:
A merchant account is where transaction money “sits” until it reaches your business bank account. It is the “middle man” between all the different parts of the card payment process and therefore allows money to be securely transferred from your customers’ payment card and cleared into your bank account.
This is not a typical bank account for merchants because you are unable to access anything directly. If you are planning on accepting credit or debit card payments, a merchant account is a necessity.
1. Decide how you want to accept credit card payments
Different businesses have different needs. Before doing anything, decide how you want to accept payments for your business. The most common ways in which merchants accept credit card payments are online, by phone, by mail or in person.
2. Search for the right account for you
The most common ways to open a merchant account are either via your bank, through an independent sales organization (ISO) or a member service provider (MSP).
3. Do your research
Evaluate different providers by understanding their fees (explained in the next section), their customer support solution, their security and the overall offering of the account.
4. Apply for the account that suits your needs
This process can be similar to opening a business bank account. Don’t worry if you are a new business as a low volume of sales can be seen as ‘low risk’ by the merchant account provider. The information during the application process is standard when applying for most financial products - business name, address, financial information, banking information etc.
5. Review the terms and sign the contract
Once you’ve been accepted by the merchant, they will draft up a contract for you to sign which will detail all of the terms and conditions. Read through each section and ensure you are happy going forward. If you are not happy, contact the provider and discuss alternative options.
It is important to understand the various types of fees when considering a merchant account. Typically these fees are determined by the way your business operates; the size of your company, credit score, potential risk factors and whether you have a history with any other merchant services. Businesses can expect to pay transaction fees which are calculated by the actual transaction amount and a flat fee (this can vary depending on your merchant services provider), minimum fees which are applied monthly, and gateway fees which are only charged if the merchant services provider uses a third party payment processor.
Understanding the importance of interchange fees, what they mean, and how they relate to your business is crucial for businesses considering a merchant account. Also known as interchange rates or pricing, these fees are charged to the merchant by a credit card processor (such as CardConnect), and must be paid in order for the merchant to accept credit card payments. These rates are set by the card associations and the card-issuing banks.
Interchange fees are determined by the type of merchant you are, how big or small your company is and how your company accepts payments.
To find out more about interchange rates and pricing, click here to listen to a podcast from Angelo Grecco, our Chief Business Development Officer, and George Peabody from Glenbrooks’ Payments on Fire, who discuss at length the importance of interchange fees.
There are hundreds of interchange cost structures available, which is where interchange optimization can really help your business find the best rates available to maximize on credit card processing savings. Interchange optimization is based on industry-specific program requirements created by the major card brands (MasterCard, Visa, AMEX), and ensures that your business qualifies for the best interchange rates in every transaction that you process.
The Payment Card Industry (PCI) Security Standards Council enforces a set of standards called the PCI Data Security Standards. These standards make sure that all customer and credit card information is securely handled, lessening the impacts of a data breach.
CardConnect’s devices are protected by CardSecure, which is a combination of point-to-point encryption (P2PE) and our patented tokenization. This ensures that your customers’ payment data is instantly protected at the point of entry, guaranteeing secure transmission for processing. Using patented, intelligent tokenization, CardPointe reduces the challenges they encounter with PCI compliance for all transactions – both card-present and card-not-present. Only P2PE certified vendors like CardConnect can deliver this type of unparalleled level of payment security.
Merchant services can really help your business grow and control costs. Engaging a payment processor that uses their own products and technology is more likely to be cost effective. Fraud prevention and data security are as paramount online as they are in-store. Choosing a merchant provider that specializes in eCommerce, for example, will ensure that you can securely accept payments from all major credit cards, as well processing popular virtual payment types, such as Apple Pay.
The best merchant services can transform how your business manages transactions, saving you both time and money, allowing you to focus on other areas of your business.
This will depend on your type of business, and whether the credit card networks have assigned you any risk factors. You may experience a longer application process, or be required to pay higher fees for transactions with a bigger risk factor. Don’t worry if you are a new business as although payment processors need to understand your finances, low transactions are deemed low risk by many.
The cost of accepting credit card payments can vary. It’s important to note what fees will be assessed for your company, which will be laid out in the initial contract. The fees that you are responsible for will include both interchange rates and processing fees. Depending on the payment processor that you choose, there may be room to negotiate a better, or lower rate for your business.
The setup process is dependent on different variables of a business, like size and card acceptance method. Larger more established businesses that require multiple POS systems in multiple locations, as an example, could experience a more extensive setup.
The type of terminal you need will depend on the type of payment method your business will be accepting. If you are based in a single location, a POS terminal may be the best option, however, if you are on the move, then a virtual terminal or mobile device that works with an integrated app, for example, would be a better option.
Below is a checklist of all the points that you need to consider when choosing your merchant account provider:
A payments platform of Fiserv, CardConnect helps thousands of merchants across the U.S., from Fortune 500 to small startups, accept billions of dollars in card transactions every year.
CardConnect’s mission is to grow commerce with simple, secure and integrated payments through our patented tokenization, secure gateway and omni-channel payment acceptance solutions.
Your success in payments starts here! Please select your partnership type below so we can connect.