Why do businesses need merchant services?

Merchant services are a basket of financial goodies to nurture your payment systems... Let’s understand the critical roles they play.

Are you confused with the apparent complexities of modern payment mechanisms? Advanced retail POS systems, various modes to accept online payments, and new-age website payment gateways that facilitate QR code payments, instant bank payments, and more can be overwhelming for many small businesses in the UK.

In the dynamic landscape of modern business, mastering the art of efficient payment processing is essential for achieving success. Regardless of whether you operate a physical store, sell products online, or run a service-oriented business, deploying the appropriate merchant payment services empowers you to accept payments with ease and security.

This detailed guide will delve into the world of merchant services, uncovering their functionality and the different elements at play, empowering businesses to make knowledgeable choices when choosing a provider.

What are merchant services?

Merchant services are a collection of financial services that allow businesses to receive and process payments from customers. These services typically involve digital wallets, debit cards, and credit cards. Merchant services function as the bridge between the bank, the consumer, and the business, ensuring that transactions are processed swiftly in a highly protected digital environment.

Merchant payment services, in essence, furnish enterprises with the infrastructure required to:

●     Payment acceptance: This encompasses the acceptance of in-person payments through point-of-sale (POS) systems, online payments through payment gateways, and mobile payments through mobile POS systems.

●     Transaction processing: Merchant service providers are responsible for the secure transmission of funds from the customer's account to the merchant's account.

●     Fraud management: In an effort to safeguard businesses from chargebacks and unauthorised transactions, numerous merchant service providers provide fraud detection and prevention services.

Merchant services are indispensable for small businesses, as they offer a secure and expedient method of accepting payments without the necessity of managing the technical intricacies associated with transaction processing.

How do merchant services work?

As a consumer, you may have walked into your favourite cafe across the road, ordered your double-shot expresso, tapped your credit card on the payment terminal, and nonchalantly sauntered back to your home.

Have you ever wondered about the complex technology at work that facilitates the smooth transfer of funds from your account to the cafe’s account?

Well, as a consumer, you may not pay heed to the matter, but if you are a retail business owner, it makes sense to understand the mechanism that ensures you are receiving hassle-free payments from your customers.

Here’s a step-by-step rundown of the entire process:

●     Customer initiates the payment: The customer executes a transaction, either online, in-person, or through a mobile application, utilising their chosen payment method—credit card, debit card, or digital wallet.

●     The payment gateway gets to work: For online purchases, the payment information is collected via a payment gateway. The gateway encrypts the data for security and transmits it to the payment processor.

●     The payment processor ensures fast authorisation: The payment processor liaises with the customer's issuing bank to verify the availability of adequate funds or credit. Upon approval, the transaction is sanctioned, and a confirmation is dispatched in return.

●     The funds are settled: Upon authorisation, the monies are transferred from the customer's account to the merchant's account. This procedure typically requires one to two working days, although it may be expedited with specific merchant payment services.

●     The merchant receives payment confirmation: The enterprise obtains verification that the payment was successful, concluding the transaction.

Popular payment providers like Square, PayPal, and Elavon streamline these processes, which enables businesses to concentrate on other demanding facets of their business than payment management. For example, Wonderful facilitates instant payments and integrates with QR code payments, thereby enhancing the efficiency and speed of transactions for businesses seeking to modernise their payment infrastructure.

What is included in merchant services?

Gone are the days when payment processing included only facilitating card payments. Merchant services offer a whole gamut of financial tools that seamlessly handle a variety of payment methods that modern businesses need to manage.

Let’s look at some of their services:

●     Credit and debit card processing: A fundamental function that enables businesses to accept card payments both in physical locations and online.

●     Mobile POS systems: These systems enable enterprises to process payments through mobile devices. Wonderful’s One App allows businesses to receive payments through an easy-to-use mobile POS system. Square also offers portable card readers that may be connected to smartphones or tablets.

●     Payment gateways: A payment gateway is essential for eCommerce. It securely facilitates online transactions and ensures the seamless flow of data between the merchant and the acquiring bank.

●     Recurring billing: This functionality enables enterprises, particularly those employing subscription models, to establish automatic recurring payments from clients.

●     Fraud detection: The majority of merchant service providers offer fraud prevention technologies to assist businesses in mitigating the risk of chargebacks and fraudulent transactions.

Top-notch merchant payment services combine basic solutions and additional offerings, enabling businesses to accept online payments through multiple methods while ensuring security and efficiency.

What online merchant processing services are good?

The payments market in the UK is predicted to close above $490 billion in 202. It also has an impressive projected CAGR until 2029, with the expected closure exceeding $849 billion.

No wonder a growing industry like this will encourage new entrants while the established players look to fortify their positions. Keeping simplicity, adaptability, affordability, and security in mind, we have shortlisted the top merchant processing services that cater to several business requirements.

Wonderful

A relative newcomer in the payment processing market in the UK, Wonderful leverages open banking to provide a robust small business payment system. They offer a comprehensive suite of essential merchant services through a simple and secure application.

Key features:

●     Open banking-powered payments: This enables businesses to receive real-time payments directly from consumer bank accounts, like QR code payments and instant payments, bypassing traditional card networks and reducing transaction fees.

●     Speedy settlement times: In comparison to conventional payment processors, Wonderful facilitates a more expeditious settlement of funds.

●     Secure transactions: The risk of fraud is reduced by the direct processing of payments between the consumer and the business through the use of open banking, which prevents the exposure of sensitive card information.

Wonderful's emphasis on contemporary payment solutions provides a competitive advantage, particularly for organisations that are interested in implementing innovative technologies. Their attractive flat-fee payment packages start from just £9.99 for 1000 monthly transactions.

Stripe

Stripe has established itself as a frontrunner in the payment processing sector, especially for web-based businesses and startups. Renowned for its developer-centric APIs, Stripe enables businesses to effortlessly include payment processing into their platforms. It provides an extensive array of features such as:

Key features:

●     Multi-payment modes: Stripe accommodates several payment methods, including credit cards, debit cards, digital wallets (such as Apple Pay and Google Pay), and cryptocurrency.

●     Subscription billing: It facilitates the efficient management of recurring payments, rendering it particularly suitable for SaaS enterprises.

●     International currency acceptance: Stripe facilitates transactions in more than 135 currencies, rendering it suitable for enterprises with a worldwide clientele.

Moreover, Stripe offers a comprehensive dashboard featuring in-depth analytics and data, giving businesses complete control of their payment processes.

Square

One of the most popular merchant accounts for small businesses, Square is known for its simplistic user interface that seamlessly processes in-person and online transactions.

Key features:

●     Integrated POS systems: Square's hardware, including the Square Terminal and Square Register, is highly regarded for its adaptability and user-friendliness.

●     Flat-fee pricing model: Its flat-rate pricing makes it simpler for small businesses to calculate their payment processing costs, as there are no hidden fees.

●     Online payment support: Square enables businesses to collect payments through their eCommerce sites or via payment links that are sent directly to customers.

In addition to inventory management, customer relationship tools, and detailed sales analytics, Square's point-of-sale systems offer a comprehensive solution for small and medium-sized enterprises.

PayPal

PayPal is a globally renowned merchant payment service with millions of subscribers worldwide. The following USPs make them standout as merchant accounts for small businesses:

Key features:

●     Seamless eCommerce integration: It works with popular eCommerce platforms like Shopify, WooCommerce, and Magento, which makes it easy for businesses to get set up fast.

●     Buyer protection: PayPal's method for handling disputes gives customers peace of mind, especially when they are buying something from another country.

●     International acceptance: PayPal is one of the best ways to send money to people in other countries because it works in over 200 countries and 25 different currencies.​

Despite their feature-rich, user-friendly solutions, PayPal’s pocket pinch may be a concern for small businesses or startups.

Worldpay

WorldPay is a global payment processing provider noted for its scalability and support for SMBs. With over 30 years of experience, it provides a variety of merchant services to brick-and-mortar and online businesses.

Key features:

●     Complete fraud protection: Worldpay protects merchants and customers with comprehensive fraud detection and prevention capabilities. Online and international businesses benefit from its comprehensive risk management system, which detects suspicious transactions and reduces fraud and chargebacks.

●     Currency support and global reach: It’s ideal for businesses with a strong global presence as it operates in over 146 countries. Worldpay streamlines international payments from Europe, the U.S., and Asia.

●     Multichannel payment options: Worldpay excels in multichannel payments. Through its powerful POS systems, businesses may take online and in-store payments. Worldpay integrates easily with mobile POS systems, ensuring a pleasant checkout experience on websites and mobile devices.

What do you mean by merchant payments?

Think of merchant services as the recipe for a delectable dish. It consists of various steps, from marinating to the final cooking process. In the context of merchant services, this includes managing POS systems, ensuring security protocols, handling payment gateways, as well as managing bank integrations. Merchant payments, on the other hand, are the final dish or the completed transaction that occurs when a consumer successfully makes a payment. It is the culmination of all the behind-the-scenes work (merchant services), just as a finished food is the outcome of implementing a recipe to the tee. Among various merchant payment methods, the following ones are commonly used across the globe:

●     Credit/Debit cards: POS systems or internet gateways process credit and debit cards, a popular payment method. Merchant services secure these payments, which are normally settled within a few business days.

●     Digital wallets: Mobile wallets like Apple Pay and Google Pay make in-store and online payments easier. Fast and contactless mobile wallets are becoming popular.

●     Bank transfers: Direct bank transfers are safe and reliable for big or recurrent payments. Customers can ease this process with fast payments or pay by bank from some merchants.

●     QR code payments: Customers can use their mobile banking app to pay by scanning a merchant's QR code. This fast, secure, and low-tech solution is becoming more popular as a merchant payment for small businesses.

What is merchant banking and its services?

Merchant banking is a financial service that is specifically designed to assist businesses in managing their financial requirements. These services include the facilitation of large-scale transactions, such as mergers and acquisitions, as well as the provision of advisory services and assisting in working capital procurement. Merchant banks act as intermediaries between companies and investors, offering crucial advice on corporate financing strategies.

Setting up merchant accounts is a component of merchant banking services. These accounts are crucial for online and card payment collections, as funds sent by customers are first received in merchant accounts for small businesses and then disbursed to their enterprise accounts. Additionally, merchant banks frequently render investment management services, assist with corporate restructuring, and issue business loans to facilitate business expansion.

Merchant banking services are essential for small and medium-sized enterprises that are seeking to optimise their financial management and expand their operations.

Conclusion

The evolution of merchant services, from mere card processing to a sophisticated digital payment ecosystem, has been quite a breath-taking journey. With the advent of artificial intelligence, Internet-of-Things (IoT), blockchain, and other technologies entering the fray, the merchant payments industry is set for further customisation.

As a business owner, you’d want to get on this exciting ride sooner rather than later.