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Merchant Account Services: Small Businesses Needs

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Merchant Account Services
Image by Ahmad Ardity from Pixabay

For small business owners, it is recommended that you start accepting electronic forms of payment. Of course, you must have heard of Merchant Account Services. They refer to financial institutions that act as the middle man to process all credit and debit card transactions. If you intend to accept these forms of payment, you will need to work with a merchant account servicing company. Given so many options available today, it can be challenging to find the right merchant account provider. We will walk through what you need to know about credit card processing, merchant accounts, and how you can pick your business venture’s best match. 

Credit Card Processing

Recent statistics show that there are over 1 billion credit cards in the US. The Federal Reserve Payments Study concluded in December 2019, the value of credit card payments had increased to $6.7 trillion. Credit card processing plays a significant role in card payments because it enables faster transactions. It only takes two days for funds to be available in your account. So when you decide to start allowing card payments from your customers, no matter the kind of business you operate, you need to have a credit card transaction processor. Understanding how credit card processes work will help you remain updated on the most recent technologies. It will also help you choose the kind of merchant account you desire. If you are in the US and would like to try out merchant account services, click here.

Merchant Account Services

This refers to banking services that let you process transactions and payments electronically. Such methods include debit cards, mobile payments, and credit cards. Also, merchant services cover the hardware needed to facilitate electronic transactions and the software applied. The merchant service provider, commonly known as MSP, is the company providing those services. To better understand the need for a merchant account, we will explain the process of a credit card transaction. The process involves three major stages: authorization, funding, and settlement. During the authorization phase, the following steps take place: 

  • Initiating payment by the customer, mainly done through swiping card if the customer is physically present or shopping cart when doing so online. 
  • Your shopping cart then requests authorization for payment from the processor. After that, the processor then sends the necessary transaction information to the credit card firm. After verifying the authenticity of the card, the card company shares the same information with your bank. 
  • After approving, the bank will then decline or authorize the transaction based on your customer account information, which later returned to you. 

    online credit card payment
    Image by StockSnap from Pixabay

In the funding and settlement stage, the following occurs. 

  • You send approved transactions to your parent bank at the end of the day. In the US, the funds are typically collected from the consumer’s bank. 
  • After that, the issuing bank then charges the account for the purchase and services.
  • Funds are then channeled to your bank account after two working days. The MSP services let you accept electrical forms of payments. 

Sometimes your bank will require you to get your documents notarized. A notary has a license where they are guaranteeing that the person signing the document is, in fact, the same person. For legal documents, you will be required to get your document notarized. To learn more about a notarization, read on. 

Getting a Merchant Account

Getting a merchant account is not an easy task. You need the right approach to get the best provider. Discussed below are some ways you can get a good merchant account. 

  • Determine your card processing needs: The perfect service provider will rely on what your business needs. Decide on how you will be accepting credit cards online. Find answers to questions like will you be accepting online credit cards, Visa, or mobile payments? 
  • Study the MSP market: Carefully analyze the merchant services provider to get the perfect match for your small business. The best aspect of this step is that you will know the features to prioritize. 
  • Set up your website: Most companies and institutions will need you to have a website to meet the minimum requirements. Coming up with a business website is, therefore, very important.  

Friendly Fraud

The downside to accepting online payments is that you will be exposing yourself to chargeback or friendly fraud. This is the kind of fraud whereby customers place orders online. After the transaction has been completed and the business has delivered the merchandise today, the customer then calls their bank and complains that they did not order for anything online, so the bank should cancel the transaction. Of course, the bank will trust what their customer says, and it will cancel the transaction, which results in huge losses for the online business. 

Luckily, there are ways in which you can mitigate this problem and prevent substantial losses. Firstly, you can use best practices in your business, such as offering refunds, keeping clients informed about delays in shipping, being detailed, providing as much information about the product or services as possible, and having great customer services. Providing adequate information ensures that fraudsters will not claim they received something other than what they expected. Secondly, monitor and confirm clients by checking the CVV codes and monitoring their locations, etc. Thirdly, use 3D secure and lastly collect documentation by asking customers to sign an agreement transaction or provide a scan of their ID or credit card. This way, they will not have authorized the payment.