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Merchant services for small businesses: Guide for online brands

Merchant services for small businesses: Guide for online brands

As a merchant, there are many financial services you can take advantage of to ensure your business has a local and global reach.

Understanding your options can provide a gateway to a global customer base. And our guide to what you, as a merchant, can look to tap into to grow your brand.

What are online merchant services?

Merchant services cover a wide category of financial services. However, another term regularly used for it is credit card processing.

Your business will typically use them for a payment processing service, which enables businesses to take payments locally or worldwide.

The types of services available to you are listed below. You can consider these the best merchant services for small businesses.

Credit and debit card terminals

This is a card reader that connects to an online merchant account and payment gateway. It’s a physical item and will need access to the internet to work.

Virtual terminals

If you accept card payments online, then you’ll need one of these. They let you process credit/debit card payments and, essentially, act as an online version of a card terminal.

Payment gateways

A payment gateway is the software that sends transactions details across the internet. It does this by first encrypting the data.

The funds then go through a process of fraud detection and verification to ensure the amount owed is in the customer’s bank account.

Payment processors

A processor authenticates payment data and secures a transaction before it completes.

This aspect of the payment process is all about communicating payment information, but doing so in a lightning fast way to ensure the transaction is convenient and fast.

Merchant accounts

You can think of merchant accounts as a bank account. It lets you accept payments from cards.

Once a customer’s payment is processed and authorized, the transaction will end and the funds will go into your bank account.

You’ll need to sign-up with a merchant services provider (MSP) to take advantage of these cutting edge technologies.

Why do you need a merchant account?

It’s important for your business to have a merchant account. Thinking of your business income stream, you want to provide your customers with a streamlined and modern payment methods.

You also want to meet customer expectations by offering as many payment forms as possible.

This will help to keep your payment acceptance rate up and reduce your churn rates at checkout.

With a merchant account, you’ll be able to easily and quickly accept online payments from credit and debit cards—as well as many other modern methods (such as a digital wallet).

There’s also the advantage of merchant accounts offering extra features to help your business get started. These include:

  • Check processing services,
  • Online reporting features.
  • Advanced security options.

You can also ensure you stay PCI DSS compliant (along with other financial regulations to follow), which protects your business and your customer data.

All of which means that, yes, a merchant account is pretty much mandatory for every business looking to protect its future.

But how do they work? And how will you process funds? Let’s take a closer look.

How do online payments work?

When you’re accepting payments online, these can come in the form of credit/debit cards, local payment methods, and alternative payment methods.

You’ll need a merchant account to integrate a payment gateway with a credit card processor.

The payment gateway is used to process credit cards. That’s linked to the merchant account for card processing. And there are many transaction types it can complete. Including:

  • Authorization: This process determines if the user has the funds required to complete a transaction.
  • Capture: This is for shipments, when an order item doesn’t immediately ship. If that’s the case, the funds are “captured” once the item is shipped.
  • Payment/sale: This combines authorization and capture to transfer the transaction instantaneously.
  • Refund: These are for order cancellations or if an item is returned. With this, you can repay a customer.
  • Void: This occurs if a transaction isn’t captured. It’ll be removed from a customer account after 24 hours of inaction.

There are two types of payment integrations your business can use. These are:

  • Hosted gateway: This directs a user to the payment provider’s payment page. That’s embedded into your site.
  • Direct integration: This gives you total control, plus responsibility of the checkout page and credit card data.

You may also come across the term “merchant acquirer”. This means the financial institution that an e-commerce business partners with to gain a merchant account.

What are merchant services providers and how do they work?

An MSP is, essentially, an intermediary between a customer, their bank, and you as a merchant.

Merchant processing services establish a series of verification processes. And they go like this:

  • A customer makes a purchase.
  • Payment details go to the payment gateway, before being sent to the payment processor.
  • The payment processor gets authorization to take the funds.
  • The transaction data transfers to the card network.
  • If the customer’s account is cleared, the payment is cleared.
  • The funds are sent to the merchant account.

All of that takes place in a handful of seconds—usually around three.

And as this relates largely to credit cards, we’ll now take a closer look into how this works for merchants.

Or you can try FasterPay—we do things differently to ensure payment equality for merchants and users worldwide, with absolute clarity on costs and the service you’re receiving.

FasterPay’s enterprise-level payment solution

You can save time with a simple integration process using FasterPay, whether you have coding experience or not.

Our platform provides a seamless online checkout. It’s easy to setup and provide your business with:

  • Generated pay buttons—simply copy and paste the HTML into your website.
  • Multi-currency global payment processing.
  • Our highly popular checkout page, so we take care of your customer’s transactions.
  • Recurring billing with our subscriptions.
  • Plugins like WHMCS, Shopify, Magento, and WooCommerce.
  • FasterPay Android SDK to make app payments easy.
  • Seamless and secure payment processing.
  • Exclusive business tools and features.
  • Maximized revenue.

You can find the FasterPay pricing plans to see the charges involved.

Your fees can vary by business model, but we ensure ROI as you reduce churn rates with enterprise-level transaction features.

Credit Card Payment Processing Solutions For Small Businesses: What Merchants Need To Know

So, now you know the basics. But what are the finer details for merchants? Now it’s time to explore how you can benefit from the services available to you.

What is credit card processing?

It’s the process of handling the details of credit and debit card acceptance.

With a fast and secure checkout process for customers, credit card processing helps to improve your sales while offering consumers an ultra-fast transaction system.

Is there a difference between a payment processor and a credit card processor?

A payment processor is designed to manage all types of payments worldwide, whereas a credit card processor is for credit/debit cards specifically.

If you’re considering an MSP for your business, then a quick search online will soon show you’re spoiled for choice.

It’s a cutting edge market where there are many suitable options for your business.

As part of merchant services for online businesses, the very best credit card processing companies for small businesses will look to offer you:

  • High transaction speeds.
  • Excellent uptime consistency.
  • Fair and transparent pricing rates.
  • 24/7 customer support (or close to that).

There are many popular credit card processing companies that provide these options. And we’re one of them—FasterPay. So, here’s a bit about what we offer.

How to choose the best credit card payment processing company

Finding the right card processing company for your business can be time-consuming, especially with the wealth of options available.

And so you’ll find plenty of reviews online detailing the very best online merchant services.

Why does your choice of credit card processing machine matter?

It’s essential to make the right decision so your business can benefit from a fast and reliable processor.

Also, your customers are relying on the security and speed of your service so they can make safe transactions on your website.

This means your reputation is at stake. And if you’re using a high-quality credit card processing machine, you’ll build trustworthiness around your brand that’ll help you to decrease churn rates. Plus, you’ll increase your payment acceptance rates.

And that’s why you need to carefully consider the platform you want before committing.

What is the difference between a merchant account and a business account?

Now you may be wondering whether a business account applies to your daily operations. The difference here is straightforward and we’ll explain it below:

  • Business account: This handles expenses that relate to establishing and maintaining a business. Such as with rent and utilities.
  • Merchant account: This is the bank account that’s used with a merchant services provider to deal with online payments. It’s essentially an arrangement between you and a payment processor to accept online payments.

That’s all there is to it! They’re both very important, but serve very distinct purposes for your organization.

What makes a credit card processing company good for a small business?

There are key factors that determine the quality of a great credit card processing company.

So, when considering your platform for best merchant services for online businesses look out for:

  • Competitive costs for the service.
  • The accessibility of the software.
  • Transparency of the service.
  • Overall value and ROI.

When considering all of the above, merchant fees should be a big part of your decision.

So, what type of expense is a merchant fee? This is any money you’re charged by a merchant service to a vendor for processing transactions.

The fees can vary from one provider to the next, but there isn’t an enormous difference between most. But it’s still worth doing industry research to find costs that are suitable for your business.

How much does using a credit card processing company cost? This often depends on your location and fees can vary depending on the risk of your business model.

  • US & Canada: 2.7% + 0.30 USD
  • Europe: 2.7% + 0.30 EUR
  • Russia: 3.5% + 0.30 USD
  • Turkey: 3.5% + 0.30 USD
  • Rest of the world: 3.9% + 0.30 USD

Any questions on that? You can get a direct quote here:

So, you can have a look around for the best credit card processing companies of 2021 and see some familiar international names.

How are merchant fees calculated?

This is simplified for merchants—it works by taking interchange into a flat rate, plus a percentage of the sales total. And that includes taxes.

The average rate usually comes to about 2% of the purchase amount.

What is a merchant bank fee?

This relates to merchant acquiring banks, who charge merchants a monthly fee.

It’s paid directly to the merchant acquiring bank. The reason for the charge is for online payment risks that can come about from any given transaction.

But it’s also charged due to the service provided with settling transaction funds.

What is merchant credit risk?

As a merchant, there are risks behind transactions and your business dealings.

Credit risk is a contingent liability should there be chargeback. That’s where the merchant can’t (or won’t) fund the amount of the acquirer.

Payment companies may settle with merchants several days after a transaction.

If there are issues on the side of the merchant after that, consumers can head to an bank to to request a refund.

Can you get a merchant account with bad credit?

Seeing as almost every business will need a merchant account, what happens if you have a bad credit score?

Well, the good news is it’s still entirely possible to get a merchant account.

In fact, there are banks out there who’ll offer accounts to you regardless of your credit score. So, it’s not something you need to hide from banks if you’re applying for an account.

The downside to this is you’ll, potentially, need to hand over a deposit as some way of insurance.

And you may also face higher merchant fees on top of the deposit.

As such, it’s more beneficial if you have a good credit score. And if you can start working your way towards achieving a better credit score, this’ll help you in the long-term.

But there’s no reason why you should jump at the first merchant account deal you see.

Consider fees and research for the most suitable option for your business.

How do you open an international merchant account?

If your business is looking to expand globally, you’ll want to look into opening an international merchant account.

Doing so will mean you can take payments from customers around the world.

They’re considered higher risk than a standard account, due to the increase in risk of fraud and chargebacks. This means the merchant fees will be higher than with standard accounts.

If you’re a new merchant, you may have to pay up to 6%, depending on your income. Whereas established merchants may pay as low as 2%.

If you’re wondering about the processing times for international payments, this depends on your provider.

Some are hyper-efficient and take 24 hours. However, it can take up to 1-5 business days due to the high-risk aspect of making this type of payment.

Understanding transaction fees

Credit card transaction fees will take up more of your budget, alongside the cost of credit card processing rates.

There are multiple types of transaction fees. These include:

  • Aurothization fees.
  • Pay item fees.
  • Communication fees.
  • Return item fees.
  • Address verification fee (AVS).
  • Gateway fees.
  • Wireless service fee.

These can all add up to increase costs overall and are important to consider when choosing the merchant credit card processing platform for your business.

What is the best payment method for small businesses?

To summarize this point, you can consider the various types of payment methods that are available to your business. These are as follows:

  • Credit and debit cards.
  • Digital currencies (such as cryptocurrency).
  • Electronic check (eCheck).
  • Mobile payments.
  • In-app payments (online payment apps).
  • Bank transfers.
  • Recurring billing (subscriptions).
  • EMV/Chip card solutions.
  • Prepaid cards.
  • Digital wallets.
  • Merchant accounts.
  • Buy now, pay later instant financing.
  • Cash on delivery (COD).
  • Electronic bills.
  • Gift cards.

To consider the best option for your business, you need to have an idea of where your customers are and how do they want to pay for your goods/services?

For example, SaaS businesses may run a subscription service for the software they provide on a B2B basis.

If that’s your business model, then you’d need to know how customers will pay for this on a local, national, or global basis. And a merchant account is one of the best ways to achieve that.

You can read our complete guide to online payment methods for full details on what your choices are. Or get started now and take a look at what FasterPay offers.

FasterPay provides enterprise-level merchant services

Sign-up to use one platform with multiple payment solutions. You can create a free account right here: FasterPay business account.

And you can also download our free app:

Any questions? We have our 24/7 customer support team: