How to Choose a Merchant Services Provider

How to Choose a Merchant Services Provider

Choosing the right merchant services provider to partner with your ecommerce business has a huge effect on the amount you’ll pay in fees and the ease with which you can scale your operations. If you plan to accept credit card payments on your site, you need to know what a merchant service provider does and how to choose a merchant services partner.

What Does a Merchant Services Provider Do?

A merchant services provider, also known as a merchant account provider, provides payment processing for merchants who want to accept credit and debit card payments online. They achieve this with the use of a merchant account and a PCI-compliant payment gateway. They will also typically offer a suite of additional merchant services, including:

  • A virtual terminal
  • Software integration
  • Reports and analytics
  • Customisable fraud scrub
  • Chargeback mitigation tools
  • Recurring billing capabilities
  • Customer database
  • Affiliate management

Different merchant services providers cater to certain industries and business types better than others, so it’s important to know what each merchant services provider offers before signing on the dotted line.

Questions for Merchant Services Providers

What Is Your Fee Structure?

Where merchant account providers offer a distinct advantage over other types of merchant services is in their pricing and fee structure. Third-party payment processing companies like PayPal, Square and Stripe handle credit card processing for small enterprises, however, serious businesses will usually end up paying more in transaction fees than they would with a dedicated merchant account.

To make sure you’re getting the best deal, you need to find a merchant account provider that can offer you the best fee structure given the scale of your business, your monthly transaction volume and your average ticket size. If you work in a high-risk industry, you’ll also need to find out whether the provider works with high-risk merchants and how much the additional fees will cost.

Types of Fees that Merchant Account Providers Charge

Here is a list of common types of merchant account fees that merchant services providers might charge. Ask the provider how much these are likely to add up to each month:

  • Interchanges fees
  • Assessment fees
  • Batch fees
  • Chargeback fees
  • Return fees
  • PIN debit transaction fees
  • International card fees
  • Business card fees
  • Loyalty card fees
  • Non-qualified fees
  • Retrieval request fees
  • Voice authorisation fees
  • Monthly minimum fees
  • Merchant account markup fees
  • Monthly or annual subscription fees
  • Application fees
  • PCI compliance fees
  • Statement fee
  • Early termination fees

The nature of your business will determine the best pricing structure—and hence the best merchant services provider for your business. For example, a third-party processor like PayPal would work out cheaper for a seasonal business or hobbyist who processes very few transactions. In contrast, a merchant services provider like Unicorn Group that has a monthly subscription fee but a low per-transaction fee would be better for a business with a high monthly volume of transactions.

What Kind of Software Is Included?

A merchant account with an acquiring bank isn’t sufficient by itself for credit card processing. You also need a secure payment gateway that will process all of the latest payment technologies and maintain records of your transactions and sales.

If you conduct in-store sales, you will also need payment processing equipment (point-of-sale or POS systems) such as card readers and terminals—including virtual terminals. Ideally, your physical and virtual terminals should be connected so that your transaction and sales data will be complete.

Helpful Software Features for Ecommerce

For ecommerce businesses, these questions can help you to compare the services offered:

  • Is the software included in the monthly subscription fee?
  • Is the payment gateway PCI compliant?
  • Does the software integrate with my content management system (CMS) and shopping cart system?
  • Will you integrate the software for me?
  • Can I migrate my existing data?
  • Can the software accept all of the payment channels I need, including:
    • Credit and debit cards
    • Loyalty cards
    • Gift cards
    • eCheck
    • Apple Pay®
    • Google Pay®
    • PayPal
    • Klarna
    • Direct debit
    • Electronic funds transfer?
  • Can the software automate recurring billing?
  • Can the software maintain a customer database?
  • Can the software convert the sales into my preferred currency for settlement?
  • Is the software easy to scale?

As an example, the dedicated integration team at Unicorn Group has streamlined online payments for more than 100,000 new and existing merchants, taking care of the integration with our merchants’ content management systems so that they can start accepting card payments as quickly as possible.

What Protection Does the Provider Offer Against Fraud and Chargebacks?

Fraud and chargebacks can cost businesses thousands each year, as well as jeopardising businesses’ relationships with their customers and acquiring banks. It’s important to know what protection each merchant services provider offers and whether this can be adjusted to your needs.

At a minimum, the provider should use the latest standards of SHA-256 SSL encryption and adjustable fraud scrub tools that you can customise to the threats and risks that are unique to your business without turning legitimate customers away. Chargeback mitigation is another service you really want to have as it could save you from being placed on the industry blacklist.

Do They Offer Customer Service When You Need It Most?

Quick customer service is essential when you have a problem you need to resolve. And in ecommerce where sales are around the clock, waiting until the next business day for a solution could cost you a significant amount of money.

When interviewing a potential merchant services provider, ask them what channels of communication they use (phone, email and chat) and whether they provide customer service 24 hours a day, 7 days a week, 365 days a year. When you need to troubleshoot in the middle of the night, you need to know they’ll have your back.

Ask for Testimonials from Satisfied Customers

Finally, you need to know whether the merchant services provider really delivers on what they say and whether they’re even a legitimate business. You don’t want to sign a contract only to discover that the merchant services provider is a fraud.

When you’re considering a certain provider, be sure to ask them how long they’ve been in business, review any industry certifications they have and ask for references from satisfied customers. If the provider is really a legitimate brand, they should be both willing and able to show you.

A Solid Partnership Can Take You to Success

Remember that the relationship between a merchant and their merchant services provider goes two ways. While merchant services providers will be looking for evidence that you will be a solid investment, you will also be looking for evidence that the provider will help you grow to success.

As in any partnership, both parties need to do their due diligence at the start to make sure the partnership will be a mutually beneficial one. Ultimately, when you work out how to choose a merchant services partner for your business, the relationship should propel you both toward success.

A.J. Almeda
A.J. Almeda E-Commerce Expert

A.J. is an e-commerce expert with an emphasis on digital marketing and payment processing with 15 years of industry experience. He combines this experience with an in-depth understanding of online retail and public relations to help other businesses grow and succeed.