POS Merchant Services: POS Systems vs Merchant Services

If you are looking into POS systems for the first time, you may have found yourself faced with several confusing terms that appear either interchangeable or completely different, depending on who you ask – terms such as merchant services, POS services, merchant accounts, merchant POS, or POS merchant services. Are these different names for the same thing? What do they all mean? Let’s take a closer look at these terms and see how they relate to each other.

Let us start by saying that merchant services are not exactly the same as POS systems. The term “merchant services”  is an umbrella term that describes all payment-related services and equipment that a business uses to process payments. These could include payment processors, payment gateways, credit card readers, banks or other financial institutions. In short, the term applies to any service that retail business owners use to process payments – anything that facilitates the flow of funds from buyers to sellers.

POS systems are related to merchant services, but they are not exactly the same thing. POS stands for ‘point of sale’, and it was originally used to refer to the place at which a customer made a purchase, such as a cash register or credit card reader. Now POS systems are much more complex and sophisticated – cash registers and credit card readers are just components of a larger POS system, which can also include inventory tracking, reporting functions and customer management tools. In turn, a POS system is one component among many merchant services, which can also include a payment processor, a merchant account, and an online payment gateway.

Used correctly, the term “merchant services” is a broader category that incorporates a variety of tools used together to help businesses take payments from their customers. These could include POS systems, payment processing tools and payment gateways, among other tools.

Integration is a central concept in POS systems and merchant services. Whatever POS system you use must be compatible with the merchant services you use to conduct your business. Merchant services exist to facilitate the movement of funds from your customers’ bank accounts to yours. This requires seamless integration between your point of sale and the tools the merchant services provider installs for you.

Merchant services provide a conduit through which funds can be transferred from your customer to your bank account in order to complete a transaction. The process is fast and seamless and goes through the following process:

Most POS vendors have established relationships with specific merchant service providers. This means that specific POS systems are set up to be compatible with designated providers and their tools. However, many current POS systems have the ability to integrate with third-party merchant services, even if they are not listed as supported payment partners. This would depend on the POS vendor in question. With some POS systems, you can configure your payment processing systems simply by finding the name of your processor on a menu. In other cases, this configuration may be a little more complex. All-in-one POS solutions may limit payment processing options, meaning that merchants have to use the options that are provided.

What are the advantages and potential drawbacks of working with merchant services?

The reality is that you need both a POS system and merchant services to run your retail business effectively. For transactions that involve credit cards and other electronic payment methods, merchant services are essential.

Integrated POS credit card processing provides a number of benefits:

There are some cons involved as well, such as :

There are numerous merchant service providers, so how do you choose the one that best suits your business?

The question to ask and answer for yourself is: what do you actually need from your merchant services? Consider your core needs and limitations. Do you want a merchant service that is more competitively priced than others? Is security your leading concern? Some more questions you could ask are:

Naturally, the fees you will have to pay your merchant service provider will be an important consideration for you. Providers have various pricing models and fees, so you must clarify how you will be charged. Ask if the processing fee is a flat rate or a percentage of your transaction volume. There may also be setup fees, equipment rental fees, chargebacks, account change fees, etc. These are usually charged over and above the processing fees. Before signing a contract, you should make sure that you fully understand the terms. Will there be cancellation or termination fees, for example?

In the context of payment processing systems, scalability refers to the ability of a merchant service provider to handle growing volumes of sales as a business expands. Your payment system should either be able to handle more transactions than you are currently processing, or should have the ability to scale up easily when necessary. Ask all potential merchant service providers whether their solutions are scalable. The safest way is always to have more capacity available to you than you currently need.

Access2Pay is a scalable, customizable payment system that integrates easily with a wide range of merchant service providers. Access2Pay provides you with all the POS tools you will ever need. After we have installed your software, shown you how to use a POS system, and begun providing extensive, ongoing technical support, you can enjoy greater efficiency and profitability in your retail business. We can also recommend the best merchant services to integrate with your customized payment platform. Contact us for more information.