A Small Businesses Guide To Merchant Account Services

by Josh Biggs in Finance on 26th October 2020

If you are a small business that accepts electronic payments, you need a trading account.

What is it? These are bank accounts that allow you to accept card payments from your customers in your online shop or in a regular shop. Also it could be a cryptocurrency merchant account for business.

Because there are so many options for The Top Merchant Services Providers, and finding the right supplier for a trade account can be a challenge.

Use of modern communication technologies and means creates an opportunity for Internet trading to operate on a global scale. A huge commodity mass of a diverse assortment, which makes it possible to satisfy a wide range of consumer demands in terms of price level, quality and purpose of goods.

How credit card processing works

There are about 1 billion credit cards in the USA. Americans have dozens of credit cards. Some pay for gasoline, others for food, and hold separate ones for large shops. Credit cards have different conditions. Some of them are advantageous for small payments, while others help raise the credit rating to a normal level.

You can order all the credit cards online, send them by mail, it takes different time. You can pay off your debts in different ways, sometimes you can do it with another credit card. Some credit cards have to be used all the time for bonuses, others can be forgotten for a year and the conditions will be the same.

Statista data shows that credit and debit cards are the most popular payment method for American consumers.

Thanks to credit card processing technology, these transactions take only a few seconds. In two days, the money will already be on your account.

From these figures, we can learn that credit card transactions are an integral part of a customer’s journey.

So if you accept payments from your customers, no matter what industry you are in, you need to set up credit card transaction processing.

This is where it helps you understand how this process works. And that’s because once you have more information, you can define the type of trading account that you need.

We will disclose information about each participant involved in the processing of credit cards:

  • Customer: the customer wants to purchase your services or products.
  • Payment gateways and processors: the payment gateway collects information from your customer, checks it for fraud and sends the payment information to the acquiring bank / processor. The processor connects the wiring to cards such as Visa or MasterCard.
  • Card networks (also called payment networks): the card network performs additional fraud checks and sends transaction data to the issuing bank of the card.
  • Issuing bank: it is the bank that performs one more fraud check and approves or rejects a purchase.

You will be charged a fee for processing the credit card, among other things:

  • Exchange fee: the fee for each transaction that you pay to transfer funds from the client’s bank to your bank. These fees are usually collected by card associations but paid by your client’s bank.
  • Fee for processing payments: the fee charged by your payment provider to facilitate the transaction.
  • Fixed fee: some processors charge you a fixed fee every month.
  • Unforeseen costs: you will pay a commission if the payments are refunded.

Fees vary, and this is key to finding a provider with transparent prices. For example, some card companies charge you a transaction fee based on the risk of the transaction. As you can imagine, this can lead to unexpectedly high costs.

Types of credit card processors

Service providers are one way of processing card payments, but they are not the only option available.

There are many ways to get a credit card:

  • Banks;
  • Independent sales organisation.

You can go to your bank to process the credit card because you think it is the easiest option. There is a connection here. Even if your bank approves your application, it may end up sending you to an outside company for other sales service needs, such as point of sale software and payment technologies such as a card reader.

What are trading services?

Trading account services are banking services that enable you to process payments electronically.

The provision of a range of services in the course of sales and purchase involves bringing the purchased goods to consumers. And the more services are provided, the higher the consumer value of the goods. This is aimed at modifying the product offering, without which modern trade cannot function successfully in a competitive market. All this has predetermined the successful development of various services.

Marketing of services in trade differs from marketing in industry, which makes it possible to consider the sphere of services as an independent direction on the goods market. There are certain methods for the formation of services, their planning and development, which allows service companies to solve current and future tasks, to master new markets and create a new type of service in accordance with the growing requirements of the market.

To better understand why you need to

The processing of credit cards consists of three stages: authorisation, settlement and financing.

The following steps are performed during the authorisation phase:

  1. Your client initiates a payment; this can be done in the shopping basket (online) or with the card (in person).
  2. Your shopping cart or merchant terminal requests authorization of the payment system.
  3. The bank then approves (or rejects) the transaction depending on the client’s account status and this information is returned to you.

The following steps are taken during the settlement and financing phase:

  1. You will send transactions that were authorised by your payment processor at the end of the day. These funds are collected from the consumer bank.
  2. The Client Bank (Issuing Bank) charges a fee from the client’s account for the purchase.
  3. The funds are transferred to your bank minus exchange fees.
  4. Finally, your bank will deposit the funds into your account as a rule within 48 hours.

Imagine MSP as an intermediary between your bank account, credit and debit card companies and your client’s bank (which issued the card). They allow you to securely accept electronic payments. This is very important because otherwise your customers cannot be sure that their money will be safely withdrawn from their account.

Categories: Finance