Difference Between Merchant Services and Payment Processing?

Merchant service and payment processing are two of the most important aspects of any business. However, many entrepreneurs do not know the difference between them. In this article, we will discuss the distinctions between merchant services and payment processing, as well as the benefits of each. We will also provide tips on how to choose the right provider for your company. Let’s get started!

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Definitions of Payment Processing and Merchant Service

Merchant Service is a term used to describe the full range of products and services offered to businesses that enable them to accept payments. It can include card processing, debit and credit card acceptance, and advanced solutions like gift cards and loyalty programs. Payment Processing, on the other hand, is simply one element of a Merchant Service, referring specifically to the ability to accept debit and credit cards. Payment processing is the term used for the technical steps involved in completing a financial transaction. It includes authorizing and settling payments. On the other hand, Merchant service is the broader category that encompasses all of the products and services offered by a payment processor to merchants. Some of these products and services include:

  • Setting up a merchant account
  • Processing transactions
  • Issuing credit cards
  • Fraud prevention
  • PCI compliance assistance
  • Account management
  • Customer service.

What is a Merchant Acquiring Business?

A Merchant Acquiring Business, or simply an Acquirer, is a company that provides Merchant Services to enterprises. An Acquirer typically works with two types of enterprises: the first is the Card Issuing Banks, which are the banks that issue debit and credit cards to consumers. The second is the Merchants themselves that use the products and services offered by the Acquirer to accept payments from their customers. There are numerous acquirers in any given market, each with a unique set of products and services. Business owners need to research different providers and find one that offers the best rates.

Merchant Payment Processing in Merchant Service

Merchant Payment Processing, or MPP for short, is a payment processing solution that allows businesses to accept debit and credit card payments both in-store and online. It is an important part of Merchant Services to allow businesses to easily process payments from their customers. In-Store MPP allows businesses to process cards at the point of sale, while Online MPP lets companies take payments over the phone or through their website. Both solutions offer merchants a wide range of features and benefits, making it easy to accept payments quickly and easily.

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Procedures of Creating a Merchant Account

When a business decides to start receiving card payments, it will need to set up a Merchant Account with an Acquirer. Establishing a relationship between the business and the Acquirer to start processing payments. The steps involved in setting up a Merchant Account will vary depending on the provider, but typically it includes submitting an application, providing documentation, and completing a credit check. Once the account is approved, the Acquirer will give the business a merchant ID and password, allowing them to start processing payments.

Merchant Account: Fees and Commissions

Before a business starts a relationship with an acquirer, they will need to agree to the terms and conditions of the merchant account. It will include information about the fees and commissions that the merchant will be charged for using the service. The fees and commissions that an Acquirer charges can vary greatly, so it is important for businesses to shop around and find a provider who offers rates that fit their budget.  Typical fees that may be charged include:

  • Application Fee
  • Setup Fee
  • Monthly Maintenance Fee
  • Transaction Fee
  • Gateway Fee
  • Chargeback Fee.

Bottom Line

When choosing a payment processing solution, businesses have two main options: Merchant Services or Payment Processing. Merchant Services is a more comprehensive solution that covers all of your payment acceptance needs, while Payment Processing allows you to take payments digitally and over the phone.  Merchant services and payment processing are two crucial aspects of doing business. However, the terms are often confused or used interchangeably. There is a big difference between merchant services and payment processing, and it’s essential to understand the distinctions.