Merchant Service Providers In Fintech: Who Are They & How to Choose

The digital payment boom has changed how people buy and pay for things. So today, businesses are adapting by using electronic methods to make their operations more efficient.

Statista research predicts that the overall transaction value will increase by 11.79% annually from 2023 to 2027, reaching about US$14.79 billion by 2027.

As new payment methods keep popping up and customers’ preferences change, it’s essential to understand what a merchant service provider does. They help with credit card processing and other essential services for your business. Apart from handling payments, these providers also offer various services to make it easier for merchants to manage their payments effectively.

So, join me in this article to explore who merchant service providers are, what banking merchant services are available today, what products they offer, and the complex process they use for digital payments. 

What is a Merchant Service Provider?

A Merchant Service Provider (MSP) is a financial companion for businesses that helps handle payments smoothly. It acts as a go-between for banks, customers, and merchants, making it easier for companies to accept and process payments, primarily through debit and credit cards.

These providers, or MSPs, offer various services to businesses. This includes:

• digital payment options;
• using technology to track transactions;
• Point of Sale (POS) services;
• Customer Relationship Management (CRM);
• understanding business data;
• managing overdue invoices.

 They also ensure that businesses follow payment security rules and provide help when needed.

Merchant Account Provider vs. Merchant Services Provider

Merchant services and merchant account providers have similar roles but do different things.

Merchant services cover various offerings like payments and tech solutions for businesses. On the other hand, merchant account providers focus on helping set up bank accounts just for taking card payments.

For electronic payments, a merchant account provider is like your financial friend, handling account setup, providing tools, and charging fees per transaction and each month.

Meanwhile, a merchant services provider does more, dealing with payment gateway integration, fraud prevention, chargeback management, and customer support alongside setting up accounts.

Some providers, like Stripe, offer both merchant services and access to merchant account features. It’s often smart for many businesses to pick a merchant services provider first, which might mean you don’t need a separate account.

Types Of Merchants Service Providers In Fintech

Let’s start with the basic definition of how merchant services work. Numerous merchant services come in different types, each known for specific functions.

Considering these functions, merchants provide three common service types: merchant accounts, payment services, and payment gateway providers.

Let’s delve further into the types of merchant service provider examples.

Merchant Account Providers

Merchant account providers offer specialized accounts to businesses, allowing them to accept payments from various sources. Here are the top 5 notable merchants in this niche: 

• Square
• Stripe
• Stax
• National Processing
• PayPal

Payment Processing Services Providers

Payment services providers can streamline the transaction process, ensuring funds move efficiently from the customer to the business. In my opinion, the best among them are: 

• WildApricot Payments
• Apple Pay
• Dwolla
• Due
• Square
• Stripe

Payment Gateway Providers

These providers act as intermediaries in the payment process. They securely transmit payment information between the merchant and the banks, ensuring authorization and fraud prevention. Here are some of the most trusted examples:

• Adyen
• AmazonPay
• Tap2Pay
• Fondy
• ECOMMPAY

What are Merchant Services Products Available in Fintech?

The fintech merchant service industry offers many products tailored to meet the needs of businesses and clients in the digital age. Let’s look at some of the

• Merchant Accounts. These are specialized accounts that enable businesses to accept and process electronic payments. For instance, Square’s Point Of Sale (POS) system not only facilitates payment acceptance but also integrates other business functionalities, making transactions smooth for retailers.
• Credit Card Terminals. These are devices tailored to accept card-based payments. Modern terminals, like those from Ingenico, support a spectrum of payment modes, such as chip and pin, swipe, and even contactless transactions.
• Digital Wallet Solutions. Digital wallets, like Apple Pay or Google Pay, offer consumers a platform to digitally store their payment information. This ensures quick, secure transactions without the need to enter payment details repeatedly.
• Point-of-sale (POS) Systems. These are comprehensive solutions that integrate both hardware and software components. For instance, Shopify’s POS system offers retailers a unified experience, enabling them to seamlessly manage inventory, sales, and customer relationships.
• Mobile Payment Systems. With the advent of smartphones, payment systems like Google Pay and Samsung Pay have transformed these devices into digital wallets, allowing users to make mobile payments on the go.
• Payment Gateways. These are vital for e-commerce. Platforms like Adyen and AmazonPay act as intermediaries, securely transmitting transaction information between the merchant, the bank, and the consumer, ensuring that all payments are processed securely and efficiently.
• Virtual Terminals. Essential for businesses that operate remotely or offer telephonic orders. These terminals allow merchants to enter payment details manually, facilitating transactions without the physical presence of a payment card.
• Integrated Payment Software. Systems like Intuit’s QuickBooks Payments provide an integrated solution for businesses, combining payment processing with accounting functionalities making financial management straightforward.
• Multi-Currency Payment Solutions. Platforms like Payoneer have carved a niche by offering businesses the ability to transact in various currencies, eliminating the challenges of currency conversion and facilitating smooth international trade.
• Subscription Billing Software. For businesses that operate on a subscription-based model, such software automates and streamlines the billing cycle, ensuring consistent revenue streams and enhanced customer experience.
• P2P (Peer-to-Peer) Payment Platforms. These are designed for individual users who wish to transfer money directly to others without intermediaries. Apps like Venmo and Cash App are popular examples.
• Blockchain Wallets. With the rising prominence of cryptocurrencies, blockchain wallets provide users with a platform to securely store and manage their crypto assets.
• Lending Platforms. Peer-to-peer platforms, such as LendingClub, have revolutionized borrowing by directly connecting borrowers with individual lenders, offering a more personalized lending experience.

What is Merchant Processing Looking Like in Action?

Now you understand what a fintech merchant is and their products. However, how they would work still might remain a mystery. In this article, I aim to resolve any mysteries.

#1. Customer initiates payment. For example, a customer at a coffee shop taps their contactless card on the POS terminal to pay for their order.

#2. Payment information is sent to the merchant service provider. In that case, a merchant service provider, like the above-mentioned Square, securely transmits the payment details to the respective bank for processing.

#3. Transaction relay to card company and customer’s bank. The bank relays the transaction details to the merchant service provider and the relevant card company (e.g., Visa, Mastercard).

#4. Approval requests are sent to the customer’s bank. The transaction information is forwarded to the customer’s bank for approval.

#5. The customer’s bank makes a decision. The bank evaluates the transaction, and either approves or declines the payment.

#6. Confirmation from card company to merchant’s bank. If approved, the card company sends a confirmation to the merchant’s bank.

#7. The payment terminal receives an approval code from the merchant’s bank, confirming the transaction.

#8. The specified amount is debited from the customer’s card, completing the transaction.

Benefits of Using Merchant Payment Services for Fintech

Now, let’s review what is merchant services impact on the fintech industry and the overall market. First, I suggest we dissect the issue by looking at merchants’ advantages and then moving forward toward how they can transform the way credit card payments and other financial services work.

Streamlined Transactions

The introduction of fintech solutions like Square has been a game-changer for both online and brick-and-mortar businesses. The efficiency they bring has significantly trimmed down transaction times.

In the fast-paced world of retail, even a few seconds can make a difference. Some researchers posit that retailers stand to lose up to half of their potential sales due to sluggish checkout processes and related frictions. With fintech, that’s no longer an issue.

Cost Efficiency

One of the advantages for businesses is the cost-saving potential of fintech merchant account providers. In e-commerce, where margins are often razor-thin, traditional payment gateways with hefty fees can be burdensome. In contrast, contemporary fintech alternatives like Stripe present a more cost-effective approach, saving businesses substantial costs in the long run.

Enhanced Customer Experience

Today’s consumers demand convenience and simplicity. Fintech solutions have risen to this challenge with user-friendly interfaces that come with digital wallets and mobile payments.

These platforms not only streamline the payment process but also provide an enriched user experience. The outcome? Happier customers, which translates to higher satisfaction rates and robust customer loyalty.

Global Reach

As businesses increasingly go global, the need for seamless international transactions has become paramount. Fintech firms like Payoneer have broken down geographical and currency barriers, facilitating businesses to receive payments in various currencies. 

Cashless payments eradicate the need for currency conversion, making international business smoother than ever.

Data-Driven Insights

In the age of information, data is king. Fintech solutions are adept at harvesting transactional data, granting businesses an unparalleled view of their operations and customer behavior.

Tools like QuickBooks Payments handle transactions, process payments, and give businesses actionable insights about customer spending patterns.

How to Choose the Best Merchant Service Provider for Your Business?

In today’s changing economy, offering various payment options is a must. Solutions like mobile payments, virtual terminals, and contactless payment methods boost revenue opportunities and enhance customer experiences.

Choose the merchant service provider wisely to find a reliable and trusted provider for a long-run game. With thousands of payment processing companies on the market, consider the following factors when choosing the right platform for your business.

Here are essential factors to simplify your decision-making process:

Factor 1: Integration

Opt for a provider with a user-friendly solution that seamlessly integrates into your website and systems, especially if you have a small budget and limited technical knowledge.

Factor 2: Payment Security and Compliance

Ensure your provider is PCI-compliant and implements advanced fraud protection measures like encryption, tokenization, and fraud management tools to minimize the risk of data breaches and fraud-related losses.

Factor 3: Fees

Choose transparent providers without hidden fees. Be aware of one-time setup fees, monthly/service fees, transaction fees, credit card processor fees, minimum processing fees, cancellation fees, and chargeback fees.

Factor 4: Support

Evaluate the speed and quality of customer support offered by each provider. Look for 24/7 phone, email, or chat support to address payment-related issues promptly.

Factor 5: Reliability

Check the processing uptime record of each provider. A reliable system ensures smoother transactions, better earnings, and an improved customer experience. Explore how providers handle outages to minimize impacts on your business.

Wrapping Up

In conclusion, a merchant account services provider is the number one solution and way to reshape the financial sector in the 21st century. Their innovative products and services have streamlined transactions and expanded the possibilities of how we manage and exchange money. 

As the financial technology industry continues to evolve, we can anticipate even more groundbreaking developments, ultimately shaping the future of finance.

How DashDevs Can Help?

At DashDevs, we’ve been turning fintech startup dreams into reality since 2011, with over 150 successful projects under our belt. If you’re a merchant seeking assistance with merchant service provider integration, look no further and contact us. Our team has extensive expertise and is ready to guide you through every crucial detail for a seamless integration process. Your success is our mission, and we’re here to support you every step of the way.