Merchant Services: Everything Retailers Need To Know (2023)

Illustration of a toolbox containing a tablet, credit card, a gear, and a volume icon.

Consumers want to have freedom and flexibility when choosing how to pay for your products.

2022 report reveals that debit cards and credit cards are the preferred payment method in multiple countries, followed by ACH payments, mobile payments, gift cards, store credit, bank transfers, and PayPal. In 2021, digital wallets made up 48.6% of ecommerce transaction value globally in 2021—just over $2.6 trillion.

The global payment processing market size is responding—it’s projected to grow to nearly $250 billion by 2028, from $90.88 billion in 2021.

For you, the retailer, this is where merchant services come in. It’s how you can give your customers that freedom and flexibility with payments. This guide outlines what you need to know about merchant services, the criteria to keep in mind when choosing a merchant service provider, and a list of providers to start from.

What are merchant services?

Merchant services is what allows you as a retailer to accept credit cards and other electronic payments. It’s an essential setup for both an ecommerce business and a bricks-and-mortar store.

Thanks to merchant services, you can process credit cards, debit cards, contactless payments, ACH payments, mobile payments, gift cards, store credit, and gift cards.

How merchant services works

A merchant service provider acts as an intermediary between your business, your customer, and a financial institution (your bank). It facilitates a transaction seamlessly through a secure—and rather complex—process in the back end.

  1. Your customer presents their payment method, like swiping or tapping a card on your point of sale (POS) terminal or entering payment details online.
  2. Your merchant service provider sends payment information to your bank.
  3. Your bank sends the transaction to your merchant service provider and the card company, like Visa, Mastercard, or American Express.
  4. The card company sends the transaction to the issuing bank (customer’s bank) and requests an approval.
  5. The customer’s bank either approves the transaction and sends an approval code to the card company, or declines the transaction.
  6. The card company sends the approval code to your bank.
  7. Your bank sends the approval code to your payment terminal.
  8. Your payment terminal confirms the transaction and prints a receipt.
  9. The customer’s card or bank account gets charged by the amount on the receipt.

All of this happens seamlessly and in only a few moments.

Best merchant services for 2023

If you’re looking for a merchant services provider, here are five leaders in this space for you to consider. The best option will depend on your business type, size, and needs—there’s something on this list for everyone.

1. Shopify

Shopify enables merchants to build an online store and can sell their products anywhere: on their website, in a brick-and-mortar store, in pop-up shops, and across social media channels.

Crucially, Shopify lets you accept credit cards and use dozens of payment solutions to sell to customers globally. Thanks to Shopify Payments, you’ll get access to credit card processing online and in person along with the hardware you need, and all transactions automatically go through fraud analysis.

You can also set up local payment methods for customers shopping in specific markets.

And because Shopify is a full point-of-sale system, you also get an integrated back office with inventory management, customer profiles, marketing functions, detailed reports, and omnichannel checkout options. No long-term contracts means you get full flexibility and freedom.

Cost: payment processing starts at 2.4% + $0; monthly plans start at $29/month

2. Helcim

Helcim is a payments solution that lets you accept payments in the store, on the go, and online.

Helcim offers features like recurring payments, invoicing, international payments, a customer portal, and customer relationship management. You can use Helcim’s card reader, as well as its virtual terminal that lets you take payments on a computer, tablet, or smartphone.

This is a solid option for merchants who are just getting started, as well as those that are growing—Helcim offers discounted prices for higher volumes of credit card transactions.

Cost: in-person payments start at 0.10% + $0.05, keyed and online transactions start at 0.20% + $0.10; no monthly fees

3. Square

With Square, you can accept in-person payments, as well as online payments, remote payments (like ACH transfer), and over-the-phone payments. You can use Square’s hardware like the reader for chip cards and contactless cards, a terminal, magnetic stripe reader, iPad point of sale device, and cash register.

Cost: card-present payments 2.6% + $0.10; card-not-present payments start at 2.9% + $0.30; no monthly fees

4. Stripe

Stripe is the ubiquitous payment processing platform for online businesses. Ecommerce stores can use Stripe to accept online payments in 135+ currencies, use pre-built payment pages, manage online subscriptions, and issue invoices.

Stripe’s power is in its application programming interface (API), which allows it to integrate with payment methods around the world, like Alipay in China or iDEAL in the Netherlands. On top of that, Stripe’s fraud detection is said to be one of the best you can get.

Cost: 2.9% + €0.25 for international cards

5. Stax

Stax is an all-in-one payment processing platform that enables businesses to take payments in person, over the phone, online, and on mobile, as well as to invoice customers and clients.

The pricing Stax offers caters to growing and large businesses due to a monthly fee that starts at $99. However, there’s a 0% markup on interchange fees, which makes monthly costs more predictable. This makes Stax one of the industry’s first flat-rate subscription models.

Cost: monthly plans start at $99/month

Merchant service costs 

There are three main ways your merchant services provider will charge you for processing payments: flat rate, tiered, and interchange plus.

It’s important to also be aware of interchange fees, which are a percentage of each transaction you pay to credit card companies for processing card payments. Card companies and banks assume the risk of fraud or payment issues on every transaction, and these fees cover that.

Flat rate

The most straightforward pricing model is flat rate. It’s usually a small percentage of the transaction plus an additional fixed fee.

An example of flat rate pricing is 2.9% + $0.30 per transaction. This structure is simple and predictable, making it easy to plan your expenses based on the number of sales you do in a given time period.


A tiered pricing model has different pricing levels based on the level of risk the payment processor takes with each payment type.

For example, one tier can include in-person credit and debit card payments, which are usually deemed the safest and come with lowest processing rates. The next tier can include international online payments, which come with more risk and result in higher processing fees.

Interchange plus

The interchange plus model means you’re paying the existing interchange fee plus a markup—an additional percentage or fee per transaction.

Unlike the other two pricing models, interchange plus outlines exactly what you’re paying for and uncovers any hidden fees. This can be useful to businesses looking for a provider with the most competitive pricing, but many merchants might find this level of detail overwhelming.

Incidental fees

Don’t forget about incidental fees, or additional costs your merchant service provider may charge you. Here are some to keep in mind:

  • Account setup fees
  • Recurring charges for your merchant account, like an annual or monthly fee
  • Minimum processing fee if you don’t meet a specified volume of transactions
  • Chargeback fees if a customer disputes the charge and wins
  • Payment card industry (PCI) compliance fee
  • Statement fees
  • Batch fees for settling many transactions at once
  • Cancellation or termination fees if you cancel the service before your contract is up
  • Non-sufficient funds (NSF) fee when your bank account doesn’t have the funds to cover a transaction

Offerings of a merchant services provider

The job of your merchant services provider is to collect your customer’s transaction and payment details, receive authorization from the issuing bank, collect the payment, and send it your way.

Here are the types of services and tools a merchant services company will offer you:

  • POS system: physical, in-store terminal and a back-end software that tracks sales, stock levels, and customer information. It also provides frictionless shopping options, like buy online, pick up in store (BOPIS) and browse in store, buy online.
  • Payment processing: payment solutions that are necessary for accepting cash, credit and debit cards, mobile wallets, and other forms of payment. This allows you to receive funds into your merchant account.
  • Payment gateway: the technological platform that processes online payments from your ecommerce store. It ensures you can safely accept credit and debit cards.
  • Payment terminal: the brick-and-mortar equivalent of a payment gateway in an online store, like a Chip and PIN machine. It’s a piece of hardware customers use to dip, swipe, or tap their card—or tap their NFC or RFID-enabled mobile device—to make a purchase.
  • Loyalty programs and rewards: a feature that lets you automatically and instantly reward repeat buyers. It matches customer purchases with their profile and previous activity.

How to choose a merchant services provider

Now you know what merchant services providers can offer, and the pricing structures they might use. Here are some key points to keep in mind as you research different providers:

  • Review customer support structure. If there’s an issue with payments, how will your provider handle it? Look at review sites like G2 or Capterra to read reviews from fellow business owners and learn about their direct experience with the provider.
  • Look for transparent pricing. Flat rate is often the best for a small business; tiered and interchange plus models work better for businesses with higher sales volume. Know exactly what you’re paying for, what your bill is made of, and whether there are long-term contracts.
  • Consider your payment methods. The best provider is the one that lets you offer all the payment options shoppers need from you. This can include cash, checks, echecks, credit cards and debit cards, ACH payments, mobile payments, gift cards, store credit, gift cards, store credit, and custom payments (like split payments).

Find the right merchant services for your business

There are two big advantages of having reliable merchant services in place. One is that your customers always have the payment options and methods they need, which means they can shop with ease.

The other one is your peace of mind. Cash flow is more stable because the money hits your account quickly—often within one business day. Payment processing simply works, without your interference, so you have the time and energy to focus on your products, marketing, and customers.

Go with a provider that matches your needs and budget—the effort will be worth it.

Merchant services FAQ

What is included in merchant services?

Merchant services can include a POS system, secure payment processing that covers multiple forms of payment, a payment gateway, payment terminal, and loyalty program feature.

Included features vary between providers; for example, some might serve omnichannel commerce, while others may focus only on brick-and-mortar businesses.

What are merchant services for small businesses?

When it comes to merchant services used by a small business, pricing structures are the key differentiator.

Some providers offer a pricing structure that’s tailored to large businesses with high volume of transactions, so small businesses benefit from pricing that was made with fewer transactions in mind. Flat rate is often the best choice in this case.

Otherwise, merchant services for a small business aren’t very different than for a larger one.

Is merchant services a credit card processor?

Merchant services are often considered a credit card processor, but there’s a difference. Credit card processing is one of several features that a merchant services provider offers. Others include accepting other payment forms (like cash payments and mobile wallets) and a POS system with a back-end software that tracks sales and inventory.

What is a good merchant service rate?

Your effective rate for merchant services should average between 2% and 4%. This might be higher in some cases—for example, if you’re making a lot of higher-risk transactions (e.g. card-not-present).