You may have heard the words “credit card processing” and “merchant services” used interchangeably. After all, they are synonymous, right? Well, not so fast. Indeed, they both involve the processing of payments for your business but that is where the similarities end. Whether you are a merchant or a software company with integrated payments, knowing how these are different can have a tremendous impact on your business.
Essentially, credit card processing is exactly what you think it is – the processing of payments. Credit card processors are also known as payment processors. They work backstage to route the transaction to the appropriate financial institutions to ensure prompt payment to the merchant. Sometimes a credit card processor will provide equipment at POS, assist with PCI compliance, and offer other customer support. But for the most part, you can only count on a credit card processor to facilitate transaction movement.
On the other, a merchant services provider gets more deeply involved in your business. Yes, they route transactions so you can get paid but they also will establish a relationship with you – if they’re a full-service provider, that is. This can be quite advantageous to your business.
Below are five things (in no particular order) your business gains when your partner with a merchant services provider versus a simple credit card processor.
Payment routing, compliance, security, rate qualification, integration, POS terminals, you name it. If it is payment related, it’s sure to be complex and confusing to anyone who’s not an expert. Since full-service merchant services providers often get actively involved in your business, they become your expert – your way of de-complicating the entire process.
That’s good news for you because payment expertise is the result of either years of experience or deep immersion in the process. Most merchants and integrated payment providers are busy being experts at their own business. There is often little time and even less desire to immerse themselves in the inner workings of the payment process. This is where a merchant services provider comes in handy.
A merchant services partner will be your guide to the latest technology and will keep you current on consumer trends. For example, touch-free payments and omni-channel payments are exploding with no signs of slowing down. Merchants and software companies with integrated payments alike need to enable these growing trends.
A good merchant services partner will always look for ways to save you money. Often that includes ensuring that your transactions qualify for the lowest rates possible. This may require you to pass additional data elements to qualify for Level 3 interchange rates or other reduced fees such as lodging rates. The cost savings to your business can be significant.
While we’re on the subject of pricing, a good merchant services partner will not send you a tangled-up, hard-to-understand mess of a monthly invoice. It’ll be clear and concise so you won’t need an advanced degree in payments to decipher your true costs. Some would argue that this point alone may be reason enough to seek out a good merchant services provider!
Many would agree that one of the largest headaches associated with payment processing is compliance. PCI compliance for merchants and PA-DSS compliance for software vendors with integrated payments can be cumbersome and frustrating – not to mention time and resource consuming. If you’re a software company with multiple payment processors integrated in your payment capabilities, compliance can be a moving target for you, in particular.
Because of this complexity, a merchant or a software company often will just throw up their arms in frustration and abandon the certification process all together. This is a risky move that is never recommended. First of all, for merchants, you’ll be charged a monthly non-compliance fee on your credit card processing invoices. You’re probably already paying plenty to accept card payments. You don’t want to add to it unnecessarily.
Secondly, software providers gamble with the trust of current customers and may sacrifice new customers because their software is perceived as higher risk. Neither scenario is particularly appealing.
You won’t have to go it alone if you have a good merchant services partner, though. They will work with you to reduce the complexity of certification and in many instances, reduce your scope or bring you entirely out of scope for compliance. This delivers time savings, cost savings, and Advil savings.
Good merchant services providers stay on top of trends related to fraud and data theft. As a result, their customers tend to be better informed on what to look for and how to defend against the latest threats.
Cybercrime is a growing issue for merchants and software companies with payment integration alike. A breach can be costly both to your reputation and your bank account. It’s not enough to be PCI and PA-DSS compliant. The protection you need goes much deeper than that. Cybercriminals are clever and tend to change tactics regularly. If your merchant services provider or credit card processor has not engaged you on the subject of security over the past year, you are likely at risk.
Ever been frustrated navigating through an automated system or waiting for hours on end just for a returned call to solve an issue? If so, then you very much understand the importance of reliable and accessible service and support.
The past few years have seen multiple mergers and acquisitions in the payments space. Consequently, there are fewer but much larger entities serving the payment industry. Time and again we hear horror stories of customers that have watched their service level begin to decline after one of these mergers takes place. A key difference between credit card processing vs merchant services is that a good merchant services provider keeps support and service a top priority. If you’re a merchant, that means a dedicated customer service rep that knows you and your business. If you’re a software provider with integrated payments, it means your customers are being treated with the same care that you deliver to them.
Not all merchant services providers are equal. So if are interested in proceeding down the merchant services path, you’ll need to know what to look for in your search.
If you’re a merchant, check out pages 4-7 in this brief eBook on thriving in the new age of payments. You’ll find a great description of the optimal merchant services partner.
For software providers with payment capabilities, take a look at the first chapter in this eBook written specifically for software companies.
Both are great resources for you. Or, feel free to contact me directly. I’m happy to help too!