What Are Merchant Services and Why Do They Matter?

If you want to accept credit and debit card payments for your business, securely, then merchant services are just what you’ve been looking for.

Alright, let’s not get too far ahead of ourselves. As a business owner, you’ll first need to understand what this term means and the specifics of card payment processing.

Here are the things you need to know about merchant services:

  • What this term means for your bottom line.
  • Who merchant services providers are.
  • What the transaction process entails.

What Does Merchant Services Mean?

Merchant services refer to the management of a merchant’s electronic transactions.

Merchant credit and debit card processing consist of the necessary sales information from a merchant to make the transaction possible.

There are three stages whenever a transaction is processed.

  • Authorization
  • Fund collection from the issuer
  • Payment to the merchant

This is simplified, of course, but you get the general idea. The goal is to get the funds from a customer’s account into your account in a timely, efficient manner.

What is a Merchant Services Provider (MS)? 

Businesses thrive when they have great relationships with their customers. That’s why it’s crucial to have a great relationship with your merchant services provider.

A merchant services provider allows businesses to accept different types of payment methods and use the latest security tactics to protect both you and your customers from fraud and hackers.

To put it simply, a merchant services provider is a middleman between merchants and financial institutions. Instead of worrying about tracking transactions, fraud protection, security updates, and various regulations, a merchant services provider will handle these headaches for you. Otherwise, businesses would be left to hash out every transaction and every dispute with their bank.

In addition, quality merchant services providers will give added value by providing a seamless user-interface for a better customer experience.

Offering Your Customers More Ways to Pay

Today, debit and credit cards are the most popular payment methods. However, like with all things, technology eventually changes the nature of the game. New payment methods are becoming more convenient and simpler for your customers to use.

You want to make sure you don’t fall behind the technological curve; your competition certainly won’t.

Other Payment Methods on the Rise

What is the Transaction Process for Merchant Services?

Let’s break down this process into eight steps. 

  1. The customer begins a transaction at a merchant’s Point of Sale (POS) system.
  2. Their transaction information (amount, card number, and issuing bank information, etc.) is sent to their merchant services provider.
  3. Your MS provider is then tasked with sending that information to the necessary card issuer.
  4. Next, that transaction information is sent to the consumer’s bank.
  5. The consumer’s bank/card issuer verifies that the funds/credit limit is enough to cover the cost of the transaction.
  6. The payment status (approval/denial) is then sent back to the card issuer.
  7. The status of this transaction is then approved with the merchant services provider.
  8. Finally, the merchant can complete the transaction with the customer.


Even though this happens in the span of a few seconds, there’s a lot that goes on between the time a transaction is started and when it ends. 

You want to create a seamless experience for the customer. The responsibility of a merchant services provider is to give your business the tools to make the payment process faster and more convenient for your customers.

In today’s market, distinguishing yourself as a business that values the customer experience is the key to success. That’s why BillingTree makes it easier than ever to let your customers pay how they want in a smooth, straightforward manner.