What is a Merchant Processor?

Let’s navigate the ins and outs of payment processing

From cash and checks to credit cards and digital wallets, businesses worldwide have equipped themselves with the ability to accept all kinds of payments. A reliable merchant processor can be the best weapon in your arsenal when it comes to running a thriving business. In this article we explain what a merchant processor is and what service they provide. 

Running a business is no easy feat. As a business owner or manager, you’re aware of the challenges one encounters when operating a business. To make transactions smooth, a dependable payment processor is vital. You want your customers to make payments in a secure and convenient manner. You also want to get paid for your products and services in a timely fashion. In this article, we will discuss the primal element necessary for taking payments – a merchant processor. 

No business can thrive in today’s world by being cash-only. You must accommodate other forms of payments for the convenience of your customers. 82% of American adults possess at least one credit card. Half of American adults own at least two credit cards and about 13% of the population has at least five credit cards.

There is a growing number of shoppers who prefer cashless transactions. In fact, 70% of consumers say that they will make digital wallets their primary payment method for shopping. You need to work with a merchant processor that will help you accept all kinds of payments without a big cost.

What is a merchant processor?

A merchant processor, or merchant services provider, may be described as an entity that enables businesses to get paid by serving as a medium between a business and financial institutions. In simple terms, a merchant processor allows a business to accept non-cash transactions such as credit cards, debit cards, online payments, digital wallets, etc.  

A merchant processor may provide one, or multiple types of merchant accounts.

Acumen Connections is a one-stop merchant processor that empowers businesses with the right card machine products and plans tailored to fit their unique needs. Apart from payment solutions, we also provide solid advice on various industry areas in our business tips blog.

Types of merchant services providers

Not all merchant providers are the same. They can be categorized into three types based on their functions. 

Let’s dive into each type:

1. Merchant account provider

These allow businesses to accept credit and debit card payments. This type of provider is best suited for businesses that make a tremendous number of card transactions. A “merchant ID” is issued by the bank that is unique for every business. Under this model, businesses can get quick access to funds and pay lower processing fees.

2. Payment services provider

These providers allow businesses to accept both online and offline digital payments without a specified merchant account. Businesses under this model do not require a unique merchant ID. This type of provider is more suited to fulfil the payment needs of small businesses.

3. Payment gateway provider

This type of provider offers businesses a platform to accept online transactions in a secure manner. Customers can shop online and make payments through a secure gateway over the internet. Online security and fraud prevention are at the forefront of payment gateway providers as they want their customers to shop safely. Learn more about payment gateways. 

Acumen Connections provides all these services and more!

How do merchant services work?

Merchant services providers work by acting as a liaison between businesses and financial institutions or banks. They help facilitate transactions and the transfer of funds from a customer’s account to a merchant’s account.  

This seamless process is carried out in the following steps:

1. In case of an in-person transaction, the cardholder taps, swipes, taps, or in some way enters their card info into a terminal. In the case of an online transaction, the customer enters their card information into a secure payment gateway.  
2. The merchant relays this transaction to the card association and the cardholder’s issuing bank.  
3. The cardholder’s bank and card association can either approve or decline the transaction. There are a few factors that lead to this decision such as availability of credit or funds, value of item(s) purchased, occurrence of suspicious activity, etc. They make a decision.  
4. The cardholder’s bank and card association inform the merchant of their decision. Whether it’s approved or not, it will send back an alert/code. In the case of approval, the terminal or payment gateway will show “approved” in some way. If it’s denied, the terminal or payment gateway will show “denied” in some way. 
5. The merchant’s bank sends the approval code, or in some cases the denial code, to the terminal or payment gateway. If approved, the sale is captured. A receipt will print that the customer must sign. Alternatively, the customer might be asked to sign an electronic display. Either way, the cardholder receives a receipt or confirmation of sale. The merchant receives a digital record of the sale and maybe their own physical receipt as well. 
6. Merchants settle their batches at the end of each day and their bank receives the funds a few days later. 

It is interesting to note that all of the above steps take place in a matter of seconds. For detailed information on merchant services, view our ebook on payment processing 101. 

Hoping to learn more about the cost of working with a merchant processor? Read our article “What is merchant processing?” or learn more about our merchant discount programs, where some of our partnered business pay nothing for their merchant processing services.

Closing thoughts

We know what it takes to operate a business and that’s why we want to make things easier for you. Collecting payments shouldn’t be difficult. We’re here to simplify payments so that you can focus on other realms of your business. With premier technology and efficient support, you can now accept payments anywhere, anytime! 

At Acumen Connections, we do more than just credit card processing. We build life-long relationships with our merchants. Whether you run a brick-and-mortar, online store, or seasonal business, our team is dedicated to helping you every step of the way. We can get you set up with the credit card reader of your dreams like the popular Ingenico Desk 3500. Look no further for the right POS system for small business and more. Contact us today for exceptional merchant processing.