What Is Merchant Processing? Merchant Processing 101

The world of payments has changed. 

Today’s customers aren’t paying in cash, and paper checks have become a rarity since they’re too time-consuming and inefficient to be anyone’s preferred method. Instead, most customers pay with cards (76% of consumers have at least one credit card), and just 10% complete their purchases in cash. 

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For business owners, this means one thing: 

You'll lose business if you don’t have an efficient system for online credit card processing.

Unfortunately, businesses can’t start accepting credit and debit cards independently. Instead, they need a merchant processing account that serves as an intermediary between their customers’ bank accounts and their business bank account.

That’s where merchant processing comes in.

In this blog, we’ll answer the question: what is merchant processing? We’ll also discuss how good merchant processing services can help your business grow, scale, and expand offerings. 

Let’s dive in. 

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What is a Merchant Processing Account?

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A merchant account is a specialized business bank account that allows businesses to accept electronic payments from credit and debit cards. 

To facilitate easy payments and secure financial information, merchant processing accounts act as an intermediary between the two points in a payment transaction: when a customer swipes their card and when the money is deposited into a business bank account. 

A merchant processing account allows businesses to receive near-instant payments for transactions rather than waiting for customers to pay their credit card bills. 

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How Does Merchant Processing Work?

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Here’s a quick breakdown of how merchant processing services work:

• A customer makes a payment with a credit or debit card.
• The card processor sends the relevant transaction details to a merchant account.
• The merchant account provider confirms sufficient funds with the company that issued the customer’s credit card.
• Once the funds are confirmed, the merchant account provider fronts the business with the funds for the transaction.
• The funds transfer from the customer’s financial institution to yours. 

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4 Steps to Choose a Merchant Processing Provider

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If you’d like to open a merchant services account, follow these steps:

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1. Apply and be approved for an account with a merchant-acquiring bank. After you fill out an application, the approval process begins. During this process, the merchant bank will consider factors like how long you’ve been in business, whether you’ve filed for bankruptcy, what your business does, and whether you’ve had credit issues in the past.
2. Seek out merchant processing providers that specialize in high-risk industries. Unfortunately, the standard approval process can make it difficult for companies in high-risk or hard-to-place industries to secure merchant processing services. For those companies, we recommend looking for a merchant services provider that specializes in working with high-risk companies. 
3. Understand pricing models. Not all merchant processing accounts are priced the same way. While some offer flat-rate pricing, others feature tiered pricing models that can affect your monthly expenses. Be sure to choose the right pricing model for your needs.
4. Understand the fees. In addition to standard pricing, most merchant accounts charge transaction fees. Ensure you understand these fees and know how much they’ll add to your cost-per-transaction.

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The Right Merchant Processing Account Can Help Your Business Grow

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Don’t spend another day dealing with frustrating, clunky payment processing services providers or paying an arm and a leg to accept credit and debit cards. 

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Instead, partner with a reputable merchant processing platform, like Seamless Merchant, which will streamline electronic payments and help you scale your business accordingly. 

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