Merchant account provider
Encyclopedia
Merchant account providers give businesses the ability to accept debit
and credit card
s in payment for goods and services. This can be face-to-face, on the telephone, or over the internet.
Credit cards have become the preferred method of payment in today's market, making a merchant account
essential for most businesses.
networks. Typically banks both issued credit cards and helped merchants process them, but over time the industry consolidated. Now, very few banks issue credit cards and the industry is dominated by a few large issuers - Elavon
, Citibank
, Capital One
, MBNA
/ Bank of America
, and Chase
. Even fewer banks process credit cards. Banks found that it was not within their skillset to convince every small merchant to accept credit cards, and they began to outsource the selling of such services to small companies called ISOs (Independent Sales Organizations). They also found that massive scale helped reduce the cost of processing credit cards, so they began to outsource processing to a few giant processors including Elavon
, TSYS
, First Data
and MSI.
Now, while some merchants buy their credit card processing services directly from a bank, more typically they get their credit card processing services from an ISO, which is responsible for selling the service to the merchant, providing technical support, processing the transaction (authorizing it and submitting it to the Visa or Mastercard network), bears the risk of chargeback
(s), and sets the price of the services. If the ISO is a small ISO it might outsource some of those services (for example providing technical support) to a larger ISO. Except for the few very largest ISOs, the ISO outsources the actual processing to a larger company that focuses solely on processing.
While each of the firms discussed above provides merchant accounts and could legitimately be called the merchant account provider, in practice the phrase usually refers to whichever organization has responsibility for directly maintaining the relationship with the merchant.
terminals may be portable, fixed, adapted for transactions carried out behind a glass partition, or specially adapted for business-to-business transactions.
allows customers to request cash from the cash register along with the transaction. This cash is debited from their account via the EFTPOS
(Electronic Funds Transfer
at Point of Sale) terminal. This service is of considerable convenience to the customer and provides benefits to the business including increased footfall, impulse buying, and increased numbers of customers due to the added convenience of cashback.
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
and credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
s in payment for goods and services. This can be face-to-face, on the telephone, or over the internet.
Credit cards have become the preferred method of payment in today's market, making a merchant account
Merchant account
A merchant account is a type of bank account that allows businesses to accept payments by debit or credit cards. A merchant account is established under an agreement between an acceptor and a merchant acquiring bank for the settlement of credit card and/or debit card transactions...
essential for most businesses.
Overview
Historically credit card processing services were supplied by banks that were members of the Visa or MastercardMasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...
networks. Typically banks both issued credit cards and helped merchants process them, but over time the industry consolidated. Now, very few banks issue credit cards and the industry is dominated by a few large issuers - Elavon
Elavon
Elavon Inc., formerly NOVA, is a major processor of credit card transactions and a subsidiary of U.S. Bancorp. Elavon offers merchant processing in more than 30 countries and supports the payment needs of more than 1,000,000 merchant locations across the globe. Elavon is the 4th largest U.S...
, Citibank
Citibank
Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...
, Capital One
Capital One
Capital One Financial Corp. is a U.S.-based bank holding company specializing in credit cards, home loans, auto loans, banking and savings products...
, MBNA
MBNA
MBNA Corporation was a bank holding company and parent company of wholly owned subsidiary MBNA America Bank, N.A., headquartered in Wilmington, Delaware, prior to being acquired by Bank of America in 2006...
/ Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
, and Chase
Chase (bank)
JPMorgan Chase Bank, N.A., doing business as Chase, is a national bank that constitutes the consumer and commercial banking subsidiary of financial services firm JPMorgan Chase. The bank was known as Chase Manhattan Bank until it merged with J.P. Morgan & Co. in 2000...
. Even fewer banks process credit cards. Banks found that it was not within their skillset to convince every small merchant to accept credit cards, and they began to outsource the selling of such services to small companies called ISOs (Independent Sales Organizations). They also found that massive scale helped reduce the cost of processing credit cards, so they began to outsource processing to a few giant processors including Elavon
Elavon
Elavon Inc., formerly NOVA, is a major processor of credit card transactions and a subsidiary of U.S. Bancorp. Elavon offers merchant processing in more than 30 countries and supports the payment needs of more than 1,000,000 merchant locations across the globe. Elavon is the 4th largest U.S...
, TSYS
TSYS
Total System Services, Inc. is the largest processor of merchant acquirers and bank credit card issuers. Creators of TS2 and TS1. TSYS is located in Columbus, Georgia, United States. TSYS acquired a leading prepaid card processor, Clarity Payment Solutions, Inc...
, First Data
First Data
First Data Corporation is an American payment processing company headquartered in Atlanta, Georgia. First Data is a provider of electronic commerce and payment solutions...
and MSI.
Now, while some merchants buy their credit card processing services directly from a bank, more typically they get their credit card processing services from an ISO, which is responsible for selling the service to the merchant, providing technical support, processing the transaction (authorizing it and submitting it to the Visa or Mastercard network), bears the risk of chargeback
Chargeback
A chargeback is the return of funds to a consumer, forcibly initiated by the consumer's issuing bank. Specifically, it is the reversal of a prior outbound transfer of funds from a consumer's bank account, line of credit, or credit card....
(s), and sets the price of the services. If the ISO is a small ISO it might outsource some of those services (for example providing technical support) to a larger ISO. Except for the few very largest ISOs, the ISO outsources the actual processing to a larger company that focuses solely on processing.
While each of the firms discussed above provides merchant accounts and could legitimately be called the merchant account provider, in practice the phrase usually refers to whichever organization has responsibility for directly maintaining the relationship with the merchant.
Point of sale (POS) equipment rental
Point of salePoint of sale
Point of sale or checkout is the location where a transaction occurs...
terminals may be portable, fixed, adapted for transactions carried out behind a glass partition, or specially adapted for business-to-business transactions.
Purchase with cashback
CashbackCashback
Cashback may refer to:* Cashback website, a site where customers can earn cash rebates on online purchases that they make* Debit card cashback, cash that shoppers receive along with their goods when paying by debit card...
allows customers to request cash from the cash register along with the transaction. This cash is debited from their account via the EFTPOS
EFTPOS
EFTPOS is the general term used for debit card based systems used for processing transactions through terminals at points of sale. In Australia and New Zealand it is also the brand name of the specific system used for such payments...
(Electronic Funds Transfer
Electronic money
Electronic money is money or scrip that is only exchanged electronically. Typically, this involves the use of computer networks, the internet and digital stored value systems...
at Point of Sale) terminal. This service is of considerable convenience to the customer and provides benefits to the business including increased footfall, impulse buying, and increased numbers of customers due to the added convenience of cashback.
eCommerce solutions
Businesses that sell goods and services via the internet require secure means of conducting the transactions.Anti-fraud measures
Minimizing the risk of fraud both to the client and to the client's customers.See also
- Merchant accountMerchant accountA merchant account is a type of bank account that allows businesses to accept payments by debit or credit cards. A merchant account is established under an agreement between an acceptor and a merchant acquiring bank for the settlement of credit card and/or debit card transactions...
- Credit card fraudCredit card fraudCredit card fraud is a wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is also...
- Chargeback insuranceChargeback insuranceChargeback insurance refers to insurance coverage protects merchants who accepts credit cards. The coverage protects the merchant against fraud in a transaction where the use of the credit card was unauthorized, and covers claims arising out of the merchant’s liability to the service bank.This...
- Payment card industryPayment card industryThe payment card industry denotes the debit, credit, prepaid, e-purse, ATM, and POS cards and associated businesses.The term is sometimes more specifically used to refer to the Payment Card Industry Security Standards Council, a council originally formed by American Express, Discover Financial...
- PCI - Cardholder Information Security ProgramCardholder Information Security ProgramThe Cardholder Information Security Program was a program established by Visa USA to ensure the security of cardholder information as it is being processed and stored by merchants and service providers....
- CISP