What are merchant services?

Merchant services are financial solutions that let businesses process payments. It’s an umbrella term that covers a variety of different solutions. 

Companies that offer merchant services are known as merchant service providers (MSPs). They act as the bridge between customers, merchants, banks, and payment networks. Merchant service providers have one goal: make sure payments are processed securely and efficiently. 

Before we dive into merchant services, let’s first break down the key players in the payment process:

• Customers: Individuals or businesses making a payment in-person, online, or via an app

• Merchants: The companies selling a product or service

• Issuing bank: The customer’s financial institution that holds their funds and approves/declines the transaction

• Acquiring bank: The merchant’s financial institution that receives the funds

• Payment networks: The underlying infrastructure that facilitates the communication between banks

• Merchant services provider: The company that facilitates the entire payment process

Merchant services breakdown

When a customer pays, the transaction should feel effortless. This happens because of the infrastructure that makes card payments instant. While networks provide the "rails," a merchant service provider offers the services on top that make payments possible.

Merchant services typically include: 

• Point of sale (POS) systems: Hardware and software for in-person sales

• Payment terminals: The devices used to read cards or mobile wallets

• Payment gateways: The digital portal that encrypts and sends data for online sales

• Processing capabilities: The engine that handles the authorisation and settlement

• Fraud tools: AI-driven systems that spot and stop suspicious activity

• Compliance support: Help navigating local regulations, PCI DSS standards

What’s the difference between merchant services and merchant accounts?

It’s good to know that there’s a difference between merchant services vs merchant accounts. Every business needs a merchant account to process payments. Some providers include this account automatically when you sign up. Others will require you to set one up separately.

It’s easy to forget how complex the underlying infrastructure is behind merchant card services. Here’s how it works: 

1. A customer initiates a transaction: When a customer initiates a transaction with their card or digital wallet, the POS device or online portal captures the payment credentials (card number, expiry date, and CVV). Then, it forwards that information to the card processing network associated with that card. 

2. The processing network makes a decision: In seconds, the processing network will either reject or accept the transaction. That decision gets relayed back to the merchant terminal or gateway almost instantly. 

3. You receive authorisation codes: At that point, a customer can walk away with their purchase, but you don’t receive money right away. Instead, you receive authorization codes for approved transactions that must be forwarded to your payment processor. 

4. Your processor forwards information to the bank: Upon receipt of the authorization codes, the processor then forwards the information to card networks, which then forward it to the issuing bank. 

5. Your bank handles the payout: At that point, the bank takes over and handles the settlement process. The funds get deposited directly into your merchant account. The bank will also add the transaction amount to the customer’s balance so it appears on their next bank statement. 

All of this usually happens within 24-48 hours, and payment merchant services are responsible for a good portion of it. The service typically provides the gateway or terminal, the processing power behind it, and tools to spot and stop fraud. Some providers go further and offer enhanced security, faster processing, and an increased number of payment method

Choosing a provider for online merchant services comes down to finding a partner that balances technical agility with operational stability. Here is what to prioritise:

Platform reliability

Your merchant services credit card processing platform needs to be resilient. Any downtime can lead to lost sales, so you need to find something with a reliable uptime. 

When comparing solutions, ask how a provider manages testing and minimises disruptions. Investigate how a business communicates when issues arise to see if they stay focused on real outcomes.

Transparent costs and pricing

Credit card merchant services should have clear pricing. When evaluating merchant processing services, ask for a full breakdown of costs, including setup, PCI compliance, chargebacks, and any potential fees. Avoid providers that use hedging or hiding costs to inflate their value. 

Security and compliance

Your business merchant services must be a partner you can trust. Ask how they maintain PCI DSS compliance. Many merchant services will use AI and machine learning to spot and stop fraud. Ask about the kinds of safeguards that are in place. 

Additionally, consider the overall architecture of the solution. Are there multiple points of failure where there could be a data leak? Or is everything contained in a unified platform that’s owned and operated by the provider?

Consumer-facing features

Great MSPs let you expand your payments and offer a wide variety of options for consumer-facing technology. Ask about the different payment methods the company can offer, which currencies they can process, as well as the different types of terminals available. 

Think about your business use cases. Will you be processing payments in areas where there’s no internet connectivity? Do you need mobile terminals that let your staff move around? Your merchant payment service should ground its solutions in your specific context. 

Integration and partner solutions

Properly setting up and testing any payment processing system takes time, but the integration process shouldn’t be painful. Ask your potential partner about their documentation and integrations with platforms you already use. 

You should also look at the other products in the provider’s portfolio. Do they have ways to go beyond payments and offer services like intelligent checkout experiences?

For enterprise companies, choosing the right merchant processing services determines how you scale. 

By moving to a unified platform such as Adyen, you can connect every sales channel, online, in-app, and in-store, into a single, resilient infrastructure. That gives you access to more data, which helps you: 

• Offer modern shopping journeys to your customers

• Increase customer loyalty with programmes like buy online, return in-store

• Understand your audience with global transaction data

• Stop fraud and optimise your checkout to drive conversions

• Expand easily by adding local payment methods and regions through one integration

Merchant services are the foundation for how your business scales

Global payments are intricate, but your infrastructure doesn't need to be. When you choose a provider that offers a unified platform, you cut through technical complexity and stay focused on delivering a better experience for your customers.

Ready to simplify your payments? Read about how we process online payments or contact sales to learn more.