What Is a Merchant Processor?
A merchant processor, also known as a payment processor, is an entity that facilitates credit, debit or ACH transactions and other payment-related services. They act as the mediator between you (the merchant) and financial institutions. A processor’s role is to authorize these transactions and ensure the timely transfer of funds to your bank account.
Merchant processors also manage PCI (Payment Card Industry) compliance related to processing and storing payment information. This is imperative for advertisers to feel secure in making online payments. Additionally, they deliver a platform of tools to help you track and manage payments.
Next, we’ll look at how merchant services work.
How Merchant Services Work
When you engage with a merchant processor, they provide the tools and requirements to accept all forms of electronic payment. Part of this agreement involves opening a merchant services account. It establishes the relationship between you (the merchant) and the service provider.
You won’t need traditional technology to accept cards for your payment purposes, as you see in retail stores. You’re accepting payments online without the card present, so you’ll use a payment gateway. A payment gateway is software that allows for secure and accurate payment processing online.
So, the next question to answer revolves around processing costs.
The Costs Associated with Payment Processing
Merchant processors charge fees to manage and secure your transactions. This fee structure can vary but is usually a percentage of the transaction amount. They may set this with or without a cap. Some will waive this once you reach a certain fee amount.
There are two models for fees — flat or tiered. Flat-rate pricing never changes, and this is often the most cost-effective model. With flat fees, you can project costs more accurately. The price is the same regardless of the transaction or card type.
Tiered processing fees are more complicated. There are three levels:
- Qualified: These are the lowest fees and include debit cards and non-reward credit card transactions.
- Mid-qualified: These are midrange and consist of standard credit cards.
- Non-qualified: These are the highest payment fees, usually for business and reward cards, which are the types of cards your customers will likely be using.
Other things impact tiered pricing, including:
- Card-present or swiped cards (qualified): Rates range from 1.5%-2.9%.
- Keyed-in transactions (mid- or non-qualified): Rates range from 2.1%-3.5%.
- Card-not-present transactions (non-qualified), which are the bulk of what broadcasters process: Rates range from 2.4%-4.0%.
With all these levels and factors, it’s hard to discern what you’re really paying month to month. Our payment solution, PayNow, uses a flat model.
What Else Should You Know About Merchant Processors?
Here are some final takeaways to ensure you understand merchant processors and what to seek out in one.
- Look for a consolidated platform that combines invoicing, merchant processing and reporting, so you can reduce inefficiencies.
- Select a processor with a flat-rate pricing model to simplify costs and ensure transparency.
- Work with a processing platform that’s easy to set up and is ready to go in as little as one business day.
- Use a processor with Level 1 PCI compliance, the highest rating available.
- Opt for a processor that can offer next-day funding on most transactions to improve cash flow and reduce days outstanding.
Ready to learn more about streamlining and consolidating electronic payments? Read our new white paper, Modernizing the Payment Ecosystem for Media Companies with Streamlined, Consolidated Electronic Payment Solutions.
You can also check out PayNow — a payment platform designed for the media industry. Explore all its features, and request a demo today