What Does A Merchant Services Broker Do?

What Does A Merchant Services Broker Do?
By max June 2, 2023

To run a business successfully, you need a merchant account. If you are not satisfied with your current merchant service provider, you can opt for a merchant service broker to find the most reliable, cost-effective, and transparent merchant services. A merchant services broker connects you to trusted merchant service providers.

They promise to set up your merchant account and find you the payment processor that charges a minimal processing fee and offers extensive services for the smooth setup of your online payment system. The question is do you really need to work with a merchant broker to simplify the account setup and processing? Or, is it an unnecessary expense? In this post, we will walk you through the meaning and purpose of hiring a merchant service broker.

Merchant Accounts: What Do They Offer?

With a vast majority of businesses accepting payments through various channels, it’s near impossible for today’s generation to run a business with the cash-only payment option. You need a merchant account to facilitate card payments successfully.

Earlier, merchant accounts were confined to credit/debit card processing. Nowadays, the merchant service provider offers many additional services, including POS, customer relationship management, inventory tracking, and the list goes on. Simply put, they facilitate all kinds of non-cash payments through different channels.

When a customer makes a payment either through the payment gateway or in person, it’s verified by your payment processor. They contact the customer’s issuing bank to check whether their account has sufficient balance to process the transaction. If it’s approved, the payment processor will accept it and credit the funds to your accounts.

The payment processor charges a fee, which is a small percentage of the transaction value. The fee structure varies from one bank to another, which is why considering their terms and conditions and discussing the processing fee are vital to ensure smooth transactions.

What are Merchant Service Brokers?

merchant service brokers

A merchant service broker is a professional specializing in finding the perfect merchant service provider for businesses. They use their broad network and industry experience to help businesses find payment processors and other merchant service providers for their needs.

Whether you have just started an eCommerce business and are incorporating credit/debit card payments into your payment infrastructure or are dissatisfied with your existing merchant company, a merchant broker can help. Working with brokers makes sense for businesses that do not have the time and research skills to find the best merchant account provider for their eCommerce business.

The question is why use merchant broker’s service to set up your merchant account? Many financial institutions work as payment processors that handle card transactions. They use encryption and other security practices to facilitate safe transactions for the business. In return, they charge a fixed fee for every transaction. The fee is 1-4 percent of the total transaction amount. It can be higher or lower depending on the payment provider you choose, the nature of your business, the number of transactions you process every month, and other factors.

Certain high-risk and international transactions come with a high processing fee. This amount doesn’t include the initial setup and cancellation charge. The payment provider might also impose other charges if they are offering additional services, like inventory management, shipment, tracking software, etc. Other than that, most PSPs have a fixed cancellation policy, which requires the merchant to pay a specific amount should they cancel their merchant account with the payment processor before the term is up.

Although all the fees a merchant pays to the PSP might seem overwhelming, it enables them to facilitate card payments for their customers and expand their business globally.

Role and Responsibilities of a Merchant Services Broker

So, you have decided you need to open a merchant account for card transactions. The next big decision would be choosing the most appropriate and reliable PSP. That’s where a merchant service broker can help. You can’t just pick the most popular merchant service provider in your area. Just because their services worked for others doesn’t mean they are your best bet. It’s important to carefully evaluate their goals, fees, and services before finalizing the deal.

It’s not just the choice of a payment gateway and processor, but you need to integrate a point-of-sale system and a suitable card terminal into your business infrastructure. An integral part of running an eCommerce store is accepting payments in different currencies and at the lowest transaction fee.

And with so many financial institutions offering payment services, it gets hard to choose the most reliable one. In addition to the processor, you need to choose the right acquiring bank, POS system, and other transaction-related software and hardware systems for your business. The biggest perk of working with a merchant broker is that they will help narrow down your choice to the most suitable and affordable payment processors in the industry. Because of their connection with payment service providers, a merchant broker can negotiate the processing fee for you.

Here’s how they can help.

Help With Merchant Account Application

Once you have narrowed down your search to the best payment service providers, you need to apply for a merchant account. This can be pretty intimidating for startups and businesses that fall into the high-risk category. Since they handle all the card payments on your behalf, the acquiring bank will want to verify your business, payment ecosystem, and overall operation before creating your merchant account.

The process is challenging for a high-risk merchant because it is the acquiring bank that will be exposed to risk if your chargeback ratio increases dramatically or your business faces compliance issues. They will check your credit card transaction history, payment volume, industry type, bank statements, tax information, chargeback ratio, and other information.

A broker will inform you about the documents needed to apply for a merchant account and prepare you for the inspection. They take care of the paperwork. Working with a merchant service broker increases the likelihood of your application getting approved.

Negotiating the Deal

The card networks and processing companies charge a fixed fee. The percentage of the fee may vary from one provider to the other. It’s possible that you may find a service provider charging a significantly lower fee than your existing card payment processor. When choosing a merchant service provider, it’s important to consider your monthly transaction volume.

A merchant broker will take your business, transactions, and other factors into consideration to figure out a suitable PSP based on the fee and services. They can help you identify unreliable PSPs that charge an extraordinarily high fee or do not have a great reputation in this business. As mentioned above, some merchant brokers specialize in negotiating the deal with the payment company. Since they have connections, they can use this to find you the best deal.

Get Other Services

Payment processors will facilitate card transactions. But what about the software and hardware required to process these transactions? You will need a virtual terminal, point of sale system, payment gateway, and card readers to process these transactions smoothly.

The process is simple and the setup cost is minimal if you are running an eCommerce business. But if you also have a brick-and-mortar store, the setup will include the hardware, software, and other systems. All these things combined will help you accept card payments both online and through your retail POS system. Here, the merchant broker will guide you to choose the payment gateway and the software and hardware units for card payment processing. You can get it either on lease or purchase the hardware.

How to Hire a Reliable Merchant Broker?

Just like a payment service provider, a merchant broker plays a vital role in finding you a credible and affordable payment service provider. Before hiring them, look for customer reviews, qualifications, past experiences, and other factors. Here’s how you can find a trusted merchant broker for your business.

Check Reviews

Talk to their previous clients to get a better idea of their service and experience. Do not make a decision based on the reviews published on the broker’s website. Check for their reviews on trustpilot.com and other review platforms to learn more about the quality of their service. Since they will be primarily offering consultation, it’s important to work with someone with experience in this industry.

Stellar Customer Support

Another important thing to consider when hiring a merchant service broker is customer support. You don’t want to get stuck with someone that doesn’t respond to you when you need urgent help with your card transactions or payment gateway. Remember, a credible merchant broker will be willing to offer assistance after you are done setting up the payment gateway, Retail POS, etc.

Bottom Line

Working with a merchant broker will help you save time researching different merchant account providers and narrowing your options to the best of all. Before you start your search for a merchant broker, know that they work on a commission basis. So, there’s a chance they might recommend the PSP based on what suits their interest than what’s best for you.