Merchant Service Providers: What Are They & What Do They Do?
To accept card payments and other non-cash transactions, restaurants need merchant service providers to handle the growing prevalence of new technology and trends. In exchange for these safe payment processing, though, restaurants have to pay a fee on every sale they make.
Given the thin margins that typically haunt the food service industry, these fees can generate a lot of stress for restaurants. Don’t blindly pay vendors or put off advanced processes: Do your research and find a merchant service provider (also known as an MSP) that works for you.
Merchant Service Providers
Before diving into how MSPs interact with other systems to complete a transaction, let’s examine what MSPs are and what they do. These companies allow merchants to take non-cash payments and they usually go hand-in-hand with other software and features like advanced Point of Sale systems.
Restaurant merchant service providers have a close relationship with their customers, as they provide everything necessary to accept non-cash payments. Nontraditional transactions include: Credit cards, debit cards, mobile wallets and card-not-present transactions. Many restaurants now equip themselves with card readers, mobile Point of Sales and other devices that can accept online and offline payments to guarantee smooth business.
Credit Card Processors
Unlike other terms we’ll discuss in this article, credit card processors handle the communications between the MSPs and whichever bank the MSPs choose as a partner. Your restaurant won’t directly interact with the credit card processors.
Payment Processing Aggregator
To handle different types of transactions, payment processing aggregators register you under a merchant ID number. All transactions made at your business go through one account, congregating all sales data in one easy place for your viewing.
A lot of small businesses prefer payment processing aggregators because it’s easy to sign up and streamline transactions with a flat rate. Prepare more accurate budgets when you know how much you’ll pay each month. Although restaurants may have to wait a few business days to receive the deposit, the exact length of time depends on the aggregator you go with. Regardless, many aggregators give you the option to pay a slightly higher fee to see your money immediately.
Why Use MSPs?
For the same functionality, businesses that take more sales prefer MSPs. With a merchant service provider, your restaurant gets its own merchant ID to seamlessly connect all your sales channels. Then restaurants can invest in smart technology that opens more revenue streams and provides a better customer experience.
Given the risk involved, payment processors and MSPs all take a cut to alleviate any damages resulting from customer fraud or restaurant bankruptcy. This covers any unforeseen circumstances wherein they might have to foot the bill. The riskier the transaction, the more they charge. For example, magstripe card payments have a higher fee attached than mobile wallets. Some restaurants employ credit card surcharges to offset the costs.
Finding the Right Provider
Before committing to any one MSP or payment processor, shop around to find exactly what you need without the unnecessary and expensive features. You might have to decide between flat fees that don’t change from month to month, allowing you to budget more effectively; situational fees that only charge for particular services, like completing the initial setup; or processing fees that depend on the particular payment method. Find a vendor that offers what you need at prices you can afford.