Merchant processing or merchant services are how a business accepts payments, including credit card processing.

What makes merchant services different from regular gateways is the service providers work with debit and credit card payments. Without them, you will have to go through manual processing in banks or ISO systems, which will take a lot of time.

Simply speaking, having a merchant processor will allow you to have a seamless purchasing transaction for your business’ customers.

To better understand the concept of merchant processing, read on to the following sections. There, we will dig deeper into its meaning, how you can start working with them, as well as the fees the products that you should expect.

What is a Merchant?

You shouldn’t confuse the term “merchants” with “merchant processors”.

Merchants specifically refer to businesses. In our case, this is you. You’re the one offering products to your customers, and thus, you will be the one receiving their payments.

Now, as a merchant, you need to provide various payment methods. This will make it more convenient for your buyers. For instance, you can set Cash on Delivery (COD), Cash on Pickup (COP), wire transfer, and for the most common method, debit and credit cards.

Unfortunately, enabling payments through debit and credit cards can be more complex. This is where you will need a merchant processing service.

Types of Merchants

Before we talk about what a merchant processing service is, let us first give you a gist about the different types of merchants. See below:

eCommerce Merchants

Ecommerce merchants include online businesses. It can be brands with bespoke websites, Amazon and eBay sellers, and likes. This also covers drop shippers.

Affiliate Merchants

Affiliates are also considered merchants. Although your main task is to promote a product, you will also be keeping track of your sales system. Doing so will let you monitor your commissions from your program’s debit and credit card payments.

Retail Merchants

Retail merchants lean more on businesses with physical stores. Although the usual payment method here is cash, setting up credit and debit options are still recommended.

Wholesale Merchants

Finally, wholesale merchants refer to suppliers or businesses that usually sell in bulk. This is where debit and credit payments are most common.

If you belong in either one of the categories above, then you definitely need to avail a merchant processing service.

What is a Merchant Processing Service?

Like what we talked about previously, a merchant processing service will serve as the bridge between your business and your customers’ debit/credit payments. They will also make online payments, like e-wallets, possible.

Some other roles of a merchant processing service provider include:

  • Collect and protect customers’ banking details
  • Track completed and pending payments
  • Generate invoice

The main advantage of availing of merchant processing is the ability to receive payments from all around the world. Because most online payments are internationally available, it’s a given that it will be good for your business.

How to Set Up a Merchant Account

Setting up a merchant account will let you work with service providers. This task can be lengthy, and thus, will require a lot of time and effort. However, having a merchant account will get rid of a lot of financial risks.

Here are the steps on how to set up a merchant account:

  • Determine the type of debit/credit cards that you want to accept (VISA, MasterCard, AmEx)
  • Choose a payment model.
  • Look for local or international banks to work with.
  • Ensure that your website complies with the requirements set by your chosen card brand and bank.
  • Prepare necessary documents for the application.
  • Fill up and submit the application form.
  • Wait for approval.

Not all merchant service providers require a merchant account. You can look into it if you don’t want to go through the process above. Still, note that it can come with a number of cons.

Merchant Processing Fees

Here are the fees that you need to pay when working with a merchant processor:

  • Setup Fees
  • Service Fees
  • Payment Processing Fees
  • Credit/Debit Card Processor Fee
  • Equipment Fees
  • Transaction Fees
  • Account Fees
  • PCI-Compliance Fees
  • Bank Statement Fees
  • Cancellation Fees
  • NSF Fees

Taking this into account, it’s best to find a service provider that has good offers for an affordable price. It will help you cut down on costs. Moreover, the fees that a provider changes will vary from brand to brand. This does not yet include the separate fees that will be charged by the debit/credit card brand.

Despite the long list of fees above, you can still expect a cost-friendly provider. You can consider looking for one with low service fees and probably 0% markup.

Products of Merchant Processing Services

Contactless Payments

Mobile Payments

Online Payment Solutions

Credit Card Terminals


All in all, a merchant processing service or merchant credit card processing solution opens a more convenient way for your business to accept debit and credit card payments.

Not only that, but it is also the provider’s responsibility to ensure your store’s compliance with PCI. This will make it easier for your customers to trust you with their data.

Having a merchant account is not always necessary. It will depend on the platform that you’re working with. Though the task is fairly time-consuming, it will guarantee smoother transactions. If you want to skip it, make sure to look for a provider that won’t require an account.

Of course, you will need to pay to get the products and services of a merchant processor. This is why it’s best to prioritize cost-efficient offers when working with a provider.

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