What is a Merchant Service Provider?

A merchant service provider (MSP) is a company that enables businesses to accept credit and debit card payments. Merchant service providers act as intermediaries between businesses and card-issuing banks, facilitating the process of electronic payments. There are so many options available, that it may be difficult to find the right merchant service provider for your business. Lucky for you, we have a list of a few we know can deliver. Read on to learn more!

Why does your business need one?

Businesses need merchant service providers in order to be able to accept credit and debit card payments from customers. When a customer swipes or dips a credit or debit card at a point-of-sale terminal, the terminal sends the transaction information to the merchant service provider, which then sends it on to the card issuing bank for authorization. If the card is approved, the funds are transferred from the customer’s account to the business’s account.

In addition to facilitating card payments, merchant service providers can also offer other related services such as fraud detection, chargeback management, and compliance with Payment Card Industry Data Security Standards (PCI DSS).

One of the main advantages of using a merchant service provider is the ability to accept card payments, which are becoming an increasingly popular way for customers to pay for goods and services. By accepting card payments, businesses can increase sales and expand their customer base. Additionally, merchant service providers can provide businesses with detailed transaction reports, which can be useful for tracking sales and identifying trends.

It’s worth noting that merchants must comply with the regulations and standards set by the card networks (Visa, Mastercard, etc) in order to be able to process payments. MSPs help merchants with the compliance, and they typically assume liability for non-compliance..

MSP Options

In terms of merchant service providers, there are several options available to businesses, each with their own set of pros and cons. Some of the most popular providers include:

Square

This provider offers a variety of point-of-sale solutions for businesses of all sizes, as well as an easy-to-use mobile app for taking payments on the go. One of the biggest pros of using Square is its flat-rate pricing model, which is simple and transparent. However, Square’s fees are generally higher than those of other providers, which may be a con for some businesses.

PayPal

PayPal is one of the most widely-used online payment processors, and it offers a variety of solutions for businesses of all sizes. The biggest pro of using PayPal is its ease of use, as well as its widely-recognized brand name. However, PayPal’s fees can be higher than those of other providers, which may be a con for some businesses.

Stripe

Stripe is another popular online payment processor, known for its developer-friendly APIs and easy integration with e-commerce platforms. One of the biggest pros of using Stripe is its low fees, which can be as low as 2.9% + 30¢ per transaction. However, Stripe’s customer support may not be as extensive as other providers, which may be a con for some businesses.

Authorize.net

Authorize.net is a provider that focuses on providing merchant services for small to medium-sized businesses. It offers a full suite of payment services like recurring billing and fraud detection. The biggest pro of using Authorize.net is the robustness of their payment services, however, their pricing model may be confusing and expensive for some businesses.

What are the Pros and Cons?

Square

Pros:

  • Flat-rate pricing model: Square offers a flat-rate pricing model, which is simple and transparent. This means that businesses pay the same percentage for all transactions, regardless of the card type.
  • Variety of solutions: Square offers a variety of solutions for businesses of all sizes, including a free card reader for small businesses, a mobile point-of-sale app, and a point-of-sale system for larger businesses.
  • Additional features: Square offers a variety of features beyond payment processing such as inventory management, customer management, and sales reporting.

Cons:

  • Higher fees than other providers: Square’s fees tend to be higher than those of other merchant service providers, which can be a con for businesses that process a lot of transactions.
  • Limited support for certain industries: Square’s offerings are geared towards small retail and service-based businesses and may not be the best fit for certain industries like restaurants or high volume retailers.

PayPal

Pros:

  • Widely recognized brand: PayPal is a well-known and widely-used online payment processor, which can increase customer trust and confidence in a business.
  • Easy to use: PayPal’s payment solutions are easy to use, which makes it a good option for businesses that are new to electronic payments.
  • Variety of solutions: PayPal offers a variety of solutions for businesses of all sizes, including a basic PayPal account, PayPal Checkout, and PayPal for Business.
  • Lower fees for digital goods: PayPal’s fees are generally lower for businesses that sell digital goods, such as e-books or online courses.

Cons:

  • Higher fees than some other providers: PayPal’s fees can be higher than those of other merchant service providers, which can be a con for businesses that process a lot of transactions.
  • Limited support for certain industries: PayPal may not be the best option for certain industries like restaurants or high-volume retailers.
  • Can have lengthy account holds and limitations: PayPal may hold funds for a certain period of time or place limitations on an account if they suspect any fraudulent activity or high-risk transactions.

PayPal has some features that other providers don’t offer, such as PayPal.me, which allows customers to send money to a business easily via a personalized link. Additionally, PayPal’s Bill Me Later allows customers to complete a purchase and pay at a later date.

It’s worth noting that PayPal’s fees can be considered a pro and a con depending on the business, it can be lower than other providers for digital goods but higher for physical goods.

Stripe

Pros:

  • Low transaction fees: Stripe’s fees can be as low as 2.9% + 30¢ per transaction, which can be more cost-effective for businesses that process a high volume of transactions.
  • Easy to integrate: Stripe’s APIs are developer-friendly, which makes it easy for businesses to integrate the service into their e-commerce platform or website.
  • Global coverage: Stripe is available in multiple countries, and it supports a wide range of currencies, which makes it a good option for businesses with international customers.
  • Additional features: Stripe offers a variety of additional features, such as recurring billing, subscriptions, and fraud detection.

Cons:

  • Limited customer support: Stripe’s customer support may not be as extensive as other merchant service providers, which can be a con for businesses that need assistance with setup or troubleshooting.
  • Limited in-person payments: Stripe’s point-of-sale solutions are primarily geared towards online payments, and it may not be the best option for businesses that need in-person payment solutions.

One of the main advantages of Stripe is its low transaction fees, making it a cost-effective option for businesses that process a high volume of transactions. Additionally, Stripe’s APIs are developer-friendly and easy to integrate, making it a popular choice for businesses that operate online. Additionally Stripe offers a variety of additional features, such as recurring billing, subscriptions, and fraud detection.

Stripe also offers some features that other providers don’t have, such as Stripe Terminal, which allows businesses to accept in-person payments via a variety of devices, and Stripe Issuing, which allows businesses to create and manage their own physical and virtual cards.

It’s worth noting that Stripe’s customer support may be a limitation for some businesses, if you need extensive assistance with setup or troubleshooting.

Authorize.net

Pros:

  • Robust payment services: Authorize.net offers a full suite of payment services such as recurring billing, and fraud detection which makes it great for businesses that require a more robust set of services.
  • Secure payment gateway: Authorize.net provides a secure payment gateway that is PCI-compliant and meets the security requirements of major credit card companies.
  • Variety of integrations: Authorize.net offers a variety of integrations with other platforms, including shopping carts, accounting software, and CRM systems.

Cons:

  • Confusing pricing model: Authorize.net’s pricing model can be confusing for some businesses, and its fees may be higher than those of other merchant service providers.
  • Limited support for certain industries: Authorize.net’s focus is on small to medium-sized businesses, and it may not be the best option for certain industries like high-volume retailers.

One of the main advantages of Authorize.net is that it offers a full suite of payment services that include recurring billing, and fraud detection. Additionally, it provides a secure payment gateway that is PCI-compliant, which is a very important aspect for businesses.

Additionally Authorize.net offers a variety of integrations with other platforms, including shopping carts, accounting software, and CRM systems.

It is worth noting that Authorize.net’s pricing model may not be transparent as some other merchant service providers, and its fees may be higher. Additionally, support and feature sets may not be as extensive for certain industries.

Bottom Line

Overall, merchant service providers play an important role in helping businesses to accept electronic payments and manage related services, allowing them to grow their sales and customer base. Ensure you do proper research before selecting one for your business.