Many consumers do not consider the payment process seriously even though they play a prime role in the chain of global financing.
The merchants are connected to payment service providers to the financial system that is much broader in the finance system so that they can accept the debit and credit card payments from the customers. The payment service providers link the consumers, merchants, financial institutions and card brand networks.
They bring all the financial parties under one roof to remit a payment experience that is much simpler and easy for the customers and the merchants by processing it efficiently and quickly. It is breached by many but important to all and is the only service that would make modern commerce feasible.
Who are the Payment Processors?
A Payment Processor plays the role of mediator between the consumers, merchants, financial institutions and card brand networks to process the transactions of electronic payments. The term merchant service providers, payment processor, payment service provider and the merchant acquirer relate to the companies that perform the functions of the payment ecosystem.
The entire process of payment transactions is handled by the payment processors to make sure the merchants get rightly paid. Starting from the authorization to the final step of settlement, they ease the funds transferred from the account of the customer to the merchant’s accounts. They serve from merchant’s behalf and get paid for the service by the merchants.
There are few payment service providers who offer only the basics, while others present support services and comprehensive consultation to the merchant clients. Apart from the provision of commodity service, payment services also offer fraud and security services, merchant financing and assistance to the regulatory compliance.
The payment services are very important in the business operation that tackles the credit cards. So, when choosing the payment service processor, one must look out for the whole package and not just fees and pricing. They should look deep in for the security offerings, customer services, protection from data and fraud breaches and flexibility and tools that help in the growth of the business.
One must know that each payment processors are different and they offer different types of service. Not all the processors are made to perform for all payment types. There are some which are specialized only in the online payment processing that is CNP or Card Not Present, while few which focus only on in-store processing which is CP or Card Present. So, before finalizing the type of payment processor, one must think and look for what is best for their future business.
How will the Card Brand Network fit in?
Card brand networks are much perceptible in the field of the payment ecosystem. They play as the mediator between the issuing bank and the payment service provider. There are two types of card networks and they are
- A debit card that is PIN-less like the Interlink, NYCE, and Cirrus
- Credit card association like the Discover, MasterCard and American Express
Wondering what is Issuing Bank? Well, in simple terms it is a financial institution, credit union or bank. They provide debit or credit card to the consumer from the networks of card brands. The issuer takes the responsibility to approve or decline the transaction request depending on the funds of customers and then finally delivering the funds to the merchant.
The issuing bank mostly combines with the card brand networks like the Chase MasterCard or Citibank VISA. American Express or Discover uses a different mode by playing the role of both the issuing bank and the card networks.
What are the other Payment Service Options?
No matter what business you are involved in, every business sure requires debit and credit card payment processing. Also, they are not connected directly. Some seek the third party help like the payment facilitators and payment gateways.
Payment gateways connect different systems such as the card processing systems and point of scale systems. They provide a business connection for the accessing of the payment processor according to their choice. They are the perfect choice for the business configurations both in-store and online.
The payment services are involved in the comprehensive service. A platform of eCommerce will present to facilitate business payments. It can also access the payment processor according to your choice.
What about ISOs and VARs?
An Independent Sales Organization, also known as ISO, plays the part of the third party that joins hands with the payment service providers to give a fresh merchant relationship. The ISOs resell the services and products from the payment service processors and also with providers of other services. ISO gets a commission from the service processors every time they sign up new merchants.
VAR or the Value Added Resellers works like a partnership with one or more payment service providers to provide the merchants the service of payments. They are also helpful in offering more features that help in complementing the payment processing like that of inventory management, sale hardware, professional services, and accounting tools.
What role do banks play?
The acquiring banks and the issuing banks work closely in the transaction of payment. The consumers get the debit or credit cards from the issuing bank. Then the acquiring bank precedes the debit and credit card payments from the merchant’s behalf. A contract is processed between the merchants and the acquiring bank in the profile of the merchant account. A fund is exchanged from the acquiring bank to the issuing bank while making sure the merchant has received the right payment for card activity payment excluding other fees and interchange.
Benefits of Payment or Merchant Service Providers
- Saves Time – The best part about payment providers is that it saves time by automatically entering the credit card and other modes of electronic payments into the software account.
- Reduces Human Error – There are chances of error when it is done manually either when entry forms duplicated or incorrectly entered data.
- Increases Cash Flow – It provides current and reliable reports on exact money the business has earned in a day making it perform better in managing inventory and payroll, vendor payment and also helps in better decision making.