One of the most important roles of a merchant services broker is to help business owners establish a merchant account that works best for them. Using their experience and connections, a merchant services broker finds the right services for each business according to their individual needs.
In addition to setting up these accounts, merchant brokers also supply owners with software and equipment they need to do to business both online and in-store. That said, the basis of what a merchant broker does relies on setting up the right merchant account.
Who Needs a Merchant Account?
Any business that wants to accept credit or debit cards as a form of payment needs a merchant account. These accounts are provided by the merchant’s acquiring banks, who partner with various card processors to facilitate electronic payments.
Online businesses cannot function without a merchant account since their customers use only credit or debit cards for payment. On the other hand, brick and mortar stores have the choice of setting up a merchant account to either accept credit and debit cards or run a cash-only business.
Why do some brick and mortar stores choose the cash-only option? Merchant accounts have charges, fees, and costs that a lot of small businesses feel they cannot afford, or would be better off without. While this is a valid concern, requiring customers to pay in cash has problems of its own. Getting a merchant account increases sales by making it easier for customers to pay – and it can come with many other benefits too.
What Does a Merchant Account Do and What Costs Are Involved?
Here’s how a merchant account works. When a customer buys something at a shop or restaurant and uses a credit or debit card, that information is sent through an electronic terminal to the bank where the merchant account is set up. The bank then goes through a card processor to contact the card issuer, whether it’s the customer’s bank or credit card company. The card issuer then approves the transaction by checking the customer’s available funds and using various security checks to protect against fraud.
Once the transaction is verified, the card processor sends the information from the card issuer back to the bank where the merchant account is set up. The credit or debit card purchase is approved, and the sale is complete. All of this happens in a matter of seconds.
There are various fees deducted from the merchant’s account with each transaction. Both the bank and the card processor can charge flat fees from $0.20 to $0.30 for each purchase – as well as a fee of up to 5 percent of the total transaction amount.
What Is a Merchant Services Broker?
One of the best ways to understand what a merchant broker is to think about who needs one. Imagine you’re that business owner who’s running a cash-only business because he’s afraid of the transaction fees but knows that accepting cards could end up being better for the bottom line. A merchant broker can help find this business a merchant account that works best for them.
Merchant services brokers are also highly beneficial to business owners who are unhappy with their current merchant account or those that might have a hard time finding one for various reasons. Because of their history with different banks and providers, merchant brokers can often get an account for businesses that are unable to get accounts elsewhere.
What Does a Merchant Services Broker Do?
Experienced merchant service brokers find their clients the best merchant accounts by working with multiple payment service providers to meet the needs of each business’s unique circumstances.
While a business owner can find a merchant account on their own, finding the right one involves a lot of work. A merchant broker handles all of this by researching different providers, evaluating and analyzing them, comparing pricing, making a lot of phone calls, and sorting through a lot of paperwork. Plus, because they’re in the business, most merchant services brokers have long-standing relationships with different providers and know what each has to offer inside and out.
How Is a Merchant Broker Beneficial for Businesses?
In addition to finding the right merchant account, a merchant services broker can help clients in a lot of other ways, too. Here are some of the other products that most merchant brokers offer:
- Credit Card Terminals. In addition to helping businesses get set up with a merchant account to accept credit and debit cards, merchant brokers can also supply the necessary credit card terminals. These can often be bought or leased from a merchant services provider and come with the required software already installed.
- Point of Sale (POS) Systems. A lot of merchant brokers also provide POS systems which combine a credit card terminal with a computer display that also allows businesses to manage inventory and monitor sales. These can be set up as stationary cash registers or used as a handheld tablet and can accept any type of payment.
- Virtual Terminals. This software turns a computer into a credit card terminal and is very useful for brick and mortar stores without online sales.
- Mobile Payment Systems (mPOS). These simple payment systems use a smartphone and mobile card reader that uses an app to connect to an existing processing network.
- Payment Gateways. This is a simple piece of software that communicates between a business’s website and the processing network that accepts payments in the brick and mortar store and on the internet. A typical payment gateway will come with other useful features, too, like security features, recurring billing options, and a database to manage customer information.
- Electronic Check Processing (ACH). This technology scans paper checks and instantly confirms that enough funds are available. It not only saves a trip to the bank but can spare a business from trying to collect bounced check fees and recover payment.
Note that all merchant service providers do not offer the same amount of services which is all the more reason why it’s so important to find the right one. While some businesses may only be looking for a merchant account, others could need a range of services to get started and being able to find everything in the same place makes the process much less stressful.
Are Third-Party Processing Services Better than a Merchant Account?
There are several third-party processing services online that may seem like they’re easier to use than getting a merchant account. That said, there are a lot of benefits to working with a merchant broker and using a merchant account.
Banks aren’t always willing to give a merchant account to new businesses, especially small startups. Business owners are often asked to submit business plans and other information to prove that the startup is viable. This is a perfect example of when a merchant broker helps because they likely already have a relationship with the bank which improves the chances of securing an account.
While setting up an account with an online service is easier, there are some drawbacks. After settlement, revenue automatically gets deposited into a merchant account and is accessible right away.
With some online services, revenue gets deposited into the account and must be transferred to a bank account. Often, there are limits on how much can be transferred at one time and it can take up to a week for the transfer to go through. This can be devastating to a small business.
While there are fees involved with merchant accounts, online services typically charge a transaction fee for each transfer. Depending on how many transactions occur, the fees to an online service could be much higher than per transaction fees charged by merchant accounts.
Another important thing for business owners to think about is customer service. With an online service, it can be difficult to get in touch with someone should problems arise. By using a merchant broker, there’s always someone to call with questions.
How to Become a Merchant Account Broker?
The main role of a merchant broker is to help businesses find a merchant account that works for them. Whether that means setting up an account with low per-transaction fees or helping a customer process international sales, an experienced merchant account broker has the knowledge and connections to help business owners find an account that works for them.
A merchant services broker also helps businesses get the tools they need to take advantage of their new credit and debit card system. Whether it’s a POS system or a credit card terminal, a lot of merchant brokers provide services after the merchant account is established. This includes customer service, something businesses can’t get from online services.