What Is a Merchant Services Broker and Do You Need One?

If you are new to accepting card payments or are unhappy with your current merchant provider, you may be tempted to sign up with a merchant services broker or merchant services consultant.

These companies promise to help you get set up with a merchant account and point-of-sale (POS) system. Some will even claim to help you negotiate a better deal on merchant services with lower credit card processing fees. But is this type of service really beneficial, and can it really give you a competitive edge?

Why Some Merchants Choose a Merchant Services Broker

In order to accept card payments in your business, you need to have a merchant account and a payment processor to process each transaction. Merchant accounts are provided by acquiring banks in partnership with card networks, and payment processors handle the actual credit card transactions through a securely encrypted payment gateway.

Because there are multiple institutions involved in a card transaction, this payment method comes with several small merchant fees that can equal 1-4% of the transaction amount. This includes the basic transaction fee along with any additional fees imposed by the payment provider, but it doesn’t include the initial setup fee or any cancellation fees. While these fees may seem off-putting at first, they are necessary for the provision of card payments and could even enable you to expand your business internationally.

What a Merchant Services Broker Does

Once you’ve made the decision to start accepting card payments, a merchant services broker can help you to sort through the options and find the solution that is in line with your goals. For example, in addition to a payment gateway, brick-and-mortar stores will need credit card terminals and an integrated point-of-sale (POS) system. For e-commerce enterprises, you’ll want to be able to accept multiple currencies at the lowest rate.

With so many options and providers from which to choose, a merchant services broker seeks to save you time by providing guidance on different merchant accounts, POS systems, and acquiring banks for your business type. In many cases, they will also try to negotiate a lower card processing rate than you could on your own—though their success may vary.

Here are a few of the tasks that a merchant services broker will take on:

Assistance With the Merchant Account Application Process

Applying for a merchant account can be a daunting process—especially if you are a startup or are considered “high-risk” (unless you specifically seek out providers that specialise in high risk merchant accounts). Generally, acquiring banks will ask for evidence that your business will be viable, including but not limited to:

• Detailed business plans
• Bank statements
• Credit checks (poor credit can make it more difficult to find a good rate)
• Tax information
• Average transaction volumes
• Credit card processing history
• Current and past chargeback ratios (excessive chargebacks are frowned upon)
• …and more

To simplify the paperwork, a broker can take care of the application process. Typically, merchant brokers have relationships with a wide range of acquiring banks, making it far more likely that they will have a relationship with a financial institution that works with your specific business type.

Negotiation With Merchant Services Providers

While the fees charged by card-issuing banks and card networks are fixed, the “markup” you will pay to your merchant account provider can vary enormously from one company to another. Taking into account your monthly and annual processing volume, a merchant services broker can indicate which merchant services providers (MSPs) might give you the best deal.

As well as helping you navigate the most common pricing models offered by MSPs, a broker will often play one company off against another to try and secure a lower rate. They may also help you to identify those MSPs that are untrustworthy or charge exorbitant fees.

Access to Payment Processing Software and Hardware

Once you have a merchant account and merchant service provider, you will need a way to accept credit card payments—which may include a virtual terminal, traditional terminals, a point-of-sale system, mobile card readers, and a payment gateway. For e-commerce businesses and other online businesses, a secure payment gateway is usually all you need. However, the setup can be much more expensive if you run a brick-and-mortar store.

In addition to providing financial advice regarding merchant accounts, many brokers offer ready-to-use payment solutions that can cover everything from terminal lease to card readers and software and can be leased on a monthly basis. If you are hesitant about adding credit card processing to your business, this assistance can streamline the process significantly.

Make Sure that Your Merchant Services Broker is Trustworthy

While merchant services consultants don’t typically charge their clients directly, a broker who is closely affiliated with one brand might talk you into a contract with unfavourable terms. Before entering into an agreement with a broker, you have to look for evidence that the broker can be trusted:

Public Listings

A legitimate merchant services agent will usually be affiliated with a trade association and recommend well-known merchant service providers. If you’re not sure whether a broker is legitimate, you can consult with Trading Standards or Citizen’s Advice.

Positive Reviews

Reading independent reviews about a broker or merchant services consultancy group can give you an idea about the quality of the service. If available, read reviews on independent sites like trustpilot.com and verified-reviews.co.uk/ rather than relying on the glowing reviews on the broker’s personal website.

Live Customer Support

A legitimate merchant services broker should be easily contactable by phone or online. If there is no live customer service, the service might be a scam. Moreover, the broker definitely won’t be there for you if you need to resolve payment issues later on.

No Aggressive Telemarketing

Excellent work speaks for itself and shouldn’t require aggressive marketing tactics. It’s much better to choose a broker based on personal recommendation or five-star independent reviews rather than give in to a firm’s incessant telemarketing calls.

Is a Merchant Account Broker Right for You?

Having someone to consult with when you’re just getting started with card payment processing can save you time and help you secure the right account for your business. However, dealing with brokers also puts you at risk of being talked into an expensive contract or provided with equipment that ends up being more expensive than needed.

The main issue is that each merchant services brokerage works on a commission basis. So even though they may sometimes help you to find a great service, they’re ultimately most likely to make recommendations that are in their own best interest. That’s why we generally recommend cutting out the middleman and doing your own research.

As long as you know what you’re looking for in a merchant provider, you can compare your options, weigh the pros and cons of different financial services, and make a decision that you know is right for your business.