What are Merchant Services?
The term merchant services refers to a range of financial products offered by various different kinds of provider. This can encompass credit and debit cards, loyalty card schemes, merchant accounts, point of sale systems and online payment processors. Loyalty cards are those card accounts that allow us to accumulate points for every purchase we make at their store, like say boots, tesco or argos, and then redeem those points in exchange for goods at a branch of that particular store. A merchant account is simply an account belonging to a retailer which allows them to accept payments from credit or debit cards via an over the counter terminal, over the phone or online. Merchant accounts are available from all the major banks as well as some independent providers. A point of sale system is like a modern version of the cash till. It allows people to pay for items using card or cash and be served by a cashier. The software in the system allows it to do things like automatically re-order new stock when a particular item is running low. Lastly, an online payment processor is a service like paypal or netbanx that allows people to pay for a whole range of goods and services online using them as a secure means of payment. Money can be deposited into your payment processor account or you can pay for things using a debit card or bank account via the processor account. Many people find this kind of account useful because of the added security it provides. Of all these various merchant services however the most popular still is making payments in person using a credit or debit card.
Online Payments
Of all the various forms of payment and merchant services available, the online sector is growing at the fastest rate. It's becoming an increasingly important way of doing business for most retailers, because it offers so many advantages over other methods of payment. This is because it not only offers the convenience of paying for things from home, but also enables retailers to reach a much wider audience, offers increased payment security and has comparatively low associated operating costs. It has allowed smaller businesses to compete with some of the giants of retailing in a way that would have been unthinkable before. Similarly, online retailing has given large businesses the freedom to expand and diversify in a way that simply wasn't possible before. Online retailing has benefitted both business and customers alike.
Business Merchant Accounts - What are the Benefits?
If you are a business or online retailer, having what is known as a merchant account can do wonders for increasing your business's profitability. Firstly, a merchant account increases the ways in which you can receive payments from customers. With a merchant account you can receive payments from all the major credit and debit card companies (Visa, Mastercard, American Express, Delta, Switch etc.), the more payment methods you leave open for customers, the more ways in which you can generate income. A merchant account also comes with the added benefit of helping to simplify your businesses accounts. With a merchant account, you receive monthly statements detailing exactly all your transactions which can make sorting out your company's taxes a lot easier.
Setting up an Online Merchant Account
A internet merchant account (IMA) is basically a way of receiving payments directly from customers via credit or debit card, bank accounts or a secure payment processor like PayPal. Payment processors also enable you to receive payments online as do 'online shopping malls'. Several major banks and payment processors (most notably paypal) also offer IMAs. IMAs are separate from regular merchant accounts for face to face, over the counter transactions and they should not thought of as such. You need a separate account to accept online, electronic payments. After a customer purchases something from you online, the money will usually appear in your merchant account around three to four days later. Retailers and businesses prefer this form of e-commerce because of the increased security of the payments.
The cost of Setting up a Merchant Account
Banks and payment processors usually charge for their merchant account services. You will usually have to pay a sign up fee of around £200 then on top of that you may have to pay day-to-day charges for transactions by debit card or it may be taken in the form of a percentage of every transaction made. This is also true of payment providers like paypal, who charge a tiny percentage for every deposit made into your account, though thankfully not for transfers should you require to move money from one account to another.
Disadvantages to using a Merchant Account
There are a few disadvantages to using merchant services, as mentioned earlier there are certain ongoing fees that you have to pay therefore it's a good idea to do a little research regarding this to find the best deal.
One solution is to use a merchant account comparison site which allows the user to receive quotes from a number of top suppliers of merchant account services without the hassle of having to trawl through the internet for the best deals. As a standard, merchant accounts usually come with long agreements so you would have to pay off the remainder of your contract if you decided you no longer wanted an account with them. Overall though, the benefits to a business of any size of using online as well as conventional merchant services in terms of increased exposure and potential income would seem to far outweigh the the downsides. And with the internet becoming an increasingly important part of today's world, it's an aspect of the financial services industry that looks set to continue to grow for some time.
