Have you been wondering what exactly does merchant service provider (MSP) mean?
Are you thinking about what is the role of a merchant service provider (MSP)?
Or maybe you are about to work with an MSP and have no idea whether it will be beneficial or not?
Well, if you are about to open – or already have opened a brick-and-mortar retail store, then you might have bumped into a merchant services provider.
Simply put, a merchant services provider or an MSP is the gatekeeper between a customer’s debit/credit card and the cash register.
The relationship between a merchant services provider and a business is critical. Do you know why it is essential? Here’s why:
- MSP allows a business to accept debit/credit card transactions from customers.
- MSP helps a business to meet the PCI compliance standards set by PCI DSS.
If you are a newbie in the business industry and do not know what MSP is, then look no further than this article. At the end of this article, you will understand how you, your business, and a merchant services provider get along.
What is the Simple Explanation of a Merchant Services Provider (MSP)?
In simple words, a merchant services provider is an entity that handles the debit/credit card transactions or other electronic payment transactions of a merchant’s business. It serves as an intermediate link between a merchant and the customers’ bank.
The primary role of the MSP is to seamlessly transfer the money from customers’ accounts to the merchant account.
The payment Card Industry or PCI is a global authority responsible for setting best practices and standards for merchants, MSPs, and credit/debit card issuing companies.
According to PCI, a merchant services provider is a business entity that:
- Is a non-payment brand.
- Process cardholder’s data.
- Stores and transmits cardholder data.
- Secures and safeguards the cardholder’s data during transactions.
So, by now, it must have been clear to you what a merchant services provider (MSP) means.
But, wait a minute. Do you know what does it mean by the term merchant? Well, if you don’t, then here’s how PCI defines a merchant:
It is an entity that processes and accepts payment transactions of the cards that bear the logo of the following members of the Payment Card Industry Security Standards Council (PCI DSS):
- American Express
What Role Does an MSP Play during the Process of Transaction?
To explain to you the role of a merchant services provider in the process of transaction, let’s refer to the transactions that are card-based.
Debit/Credit transactions are one of the most popular payment methods used by consumers as well as businesses. Here’s a step-by-step break down of payment card transactions:
Step 1: The customer enters a merchant’s retail store that has a point-of-sale (POS) payment system and swipes or inserts the debit/credit card in the payment terminal.
Step 2: The transaction information such as card number, amount, customer name, bank name, etc.) is transmitted from the merchant’s POS system to the MSP.
Step 3: In the next step, the merchant services provider passes the transaction information to the credit/debit card association (Discover, Visa, MasterCard, etc.)
Step 4: Then, the card association passes the transaction info to the bank of the consumer.
Step 5: The bank of the consumer approves the transaction after checking the credit limit. The approval of payment is sent to the credit/debit card association.
Step 6: Next, the credit/debit card association confirms the transaction to the merchant services provider of the merchant.
Step 7: In the final step, the transaction is completed by the merchant, and the customer receives a receipt.
What Type of Products Do MSPs Provide?
There are a variety of tools and equipment available for business owners who partner with MSPs. All these tools make payment processing seamless and easy. These products help the merchants to process payment transactions through various types of methods. Here are some of the most notable services provided by MSPs:
The contactless payment services include payment transactions through debit/credit cards, Google Pay, Android Pay, Apple Pay, Fitbit Pay, etc. Contactless payment devices are based on near-field communication technology (a.k.a. NFC technology).
The mobile payment service allows the merchants to accept transactions made through portable electronic devices such as cell phones or tablets. This technology also allows transferring money to family members or friends. The most notable applications that are based on mobile payment technology are Venmo and PayPal.
Credit/Debit Card Terminals
A credit/debit card terminal (a.k.a. EDC Terminal) is a device that allows a business owner to accept credit/debit card transactions. The customer only requires swiping, tapping, or dipping the card on the terminal.
eCommerce platforms allow consumers to purchase goods/services over the internet. Merchant service providers provide eCommerce solutions to merchants who have an online business. They help the merchants to accept online debit/credit card transactions and customization of the online store.
MSPs also provide virtual terminals. They are software applications that allow merchants to accept credit card payments without physically using them. Only the credit card information is required, and the transaction is completed.
Point-of-Sales System (POS)
A POS system is a place where a customer purchases services or products and makes payments at a store. In simple words, whenever a customer purchases products and pays for them at a brick-and-mortar store, the transaction is categorized as POS transactions.
Typically, payment gateways work for eCommerce platforms. These payment gateways allow merchants to securely process credit/debit card payments online.
If you are interested in partnering with a merchant services provider, you must determine the costs they charge for specific solutions. Here are some changes to keep in mind while partnering with an MSP:
- Equipment Fee
- Setup Fee
- Transaction Fee
- Monthly Fee
- Credit Card Processing Fee
Host Merchant Services is one of the top merchant services provider companies in the United States. The subscription-based solutions of HMS have taken the payment industry to a whole new level.
HMS is a well-known MSP when it comes to providing reliable and transparent services. There is no hidden fee, contract, or mark-ups.
With its advanced software, equipment, and technology, HMS has only one mission – seamlessly process transactions without data breaches.