The Basics of Merchant Services

A crucial part of doing business is the ability to accept payment, whether through cash, credit cards, or in today’s world, online payment methods.

Secure online methods of payment are particularly critical in today’s world. Because a lot of business is done online, customers are unable to pay for their goods or services with cash or in-person credit card swipes. Accepting a range of client payment options while keeping your customers' financial information secure is therefore of utmost importance.



This is where merchant service providers enter the picture.

What are merchant services

Merchant Services provide various technologies and solutions that assist companies in accepting credit/debit cards and electronic payments from clients. They’re also in charge of the secure handling and storage of consumer payment information. Other services they can provide include invoice collection, payment tracking, and data and analytics concerning pertinent information.

Finding a reliable merchant service provider who can assist you in accepting payments is invaluable. Without them you’ll have little peace of mind that finances are being handled properly.

Payment Service Providers

Payment service providers (also known as PSPs) connect merchants to the larger financial infrastructure, allowing them to take credit and debit card payments, as well as other bank transfers. This means that even if your business does not have a merchant account, PSPs can still provide a way for you to receive and manage payments in a straightforward and effective manner. This can be done both in-person and online.

Some examples of payment service providers are PayPal, Stripe, Amazon Pay, and Square. 

Pin Debit Transactions 

A PIN (personal identification number) debit card transaction works by transferring money from the customer’s bank account to the merchant’s account through the use of a payment card (debit card) that is connected to their checking account. The customer must also enter their PIN, which is essentially a password, in order for the transaction to go through. This PIN is only known to the cardholder and their bank which means even if the card was stolen it could not be used. Although these debit cards may look like credit cards, they in reality function more as electronic checks because they are pulling money directly from their own bank account.

A merchant service provider comes into play at the point of transaction when their card data and PIN are transmitted safely through them. They make sure there are enough funds in their account to pay for the goods as well as checking if the correct PIN was entered. If the money is sufficient and the PIN is correct then the money is moved to the merchant’s bank.

ACH Payments

ACH (Automated Clearing House) is a network used by the United States which allows money transfers and electronic payments. No cash, checks, credit cards, or wire transfers are involved in this type of money transfer. Although you might not know the name, you may already be using ACH payments. If you receive your paycheck through direct deposit or pay your bills electronically you are probably using the ACH network.



Many companies prefer to use ACH payments over credit card payments or paper checks because ACH tends to be more trustworthy and faster since they are electronic, which helps to simplify accounting. Typically, an ACH transfer is less expensive to complete than a credit card payment or wire transfer. So now that you know what ACH is, here are a few ways in which it is implemented practically:

Direct deposit payroll

Direct deposit payroll is very common for businesses to use, which is only possible through ACH. Employees first must provide a checking account and routing information and then funds are deposited into their workers' bank accounts at predetermined pay intervals. 

Recurring bill payments

In order to avoid the hassle of having to pay the same bill every month for things like insurance or a mortgage, people set up recurring payments. This gives the company permission to use ACH payments each billing cycle to transfer the money directly out of the customer’s account.

Quickbooks Payments Integration

This integration allows automatically processing payments and data needs to be entered just once. There is no need to do anything further once the data has been put into a company's timekeeping or order entry system. In addition, the data is put into QuickBooks in real time, which means you will have to put less hours in and save a lot of time and energy.

Common terms explained

It's important you be aware of the variety of services these companies provide, so that you can make informed decisions on how best to run your business.

Processing credit cards

Paying with credit cards, whether online or in person, has become the most popular payment method for many customers, making it critical that everything is kept secure for both your business and your clients. Merchant services companies often offer processing services for both in-person and online credit card transactions. 

Payment gateways

This is an important service if your company takes online payments. Merchant services providers can make sure you have a secure payment gateway with software that works in conjunction with your website

Point of sale systems

A point of sale (POS) system enables your company to not only receive payments from clients, but also track sales. It usually consists of a hardware/software combination with the hardware used to accept the payment and the software used to process it.

Check processing services

Though it is not as common as using a credit or debit card, some customers will prefer to pay with a check, which means that your business will need to be able to handle accepting them. Some merchant service companies make provision for this need.