What Does a Merchant Services Broker Do?

Most customers today prefer to use debit or credit cards for their transactions. If your business does not support these payment methods, you might miss out on attracting many customers. Therefore, having a dependable merchant account that allows you to accept various electronic payments, including credit and debit cards, is crucial.

A merchant services broker can be a valuable asset for your business. They leverage their knowledge and industry connections to find the most suitable merchant services tailored to your needs. These brokers assist with account setup and provide the necessary equipment and software for processing transactions in physical stores and online. The main task of a merchant services broker is to secure the most advantageous merchant account for your business.

This article will cover everything you need to understand about managing a merchant account through a broker.

What Is a Merchant Account? How Does It Work?

A merchant account is essential for businesses that want to accept electronic payments, like credit and debit cards, either online or in person. This type of account is a temporary holding spot for funds collected from customer card transactions before they are transferred to the business’s primary bank account.

Here’s how it works: When a customer purchases using a card, the transaction is processed through an electronic terminal or a payment gateway. The transaction details are then sent to the business’s acquiring bank (which manages the merchant account), which seeks approval from the card issuer (the customer’s bank or credit card company). The issuer checks for sufficient funds and validates the transaction for security. Once approved, the funds are transferred to the merchant account, and from there, they are deposited into the business’s bank account, typically within a few days​.

While the process is fast, each transaction incurs fees. These include a percentage of the transaction value and fixed costs that range from $0.20 to $0.30 per transaction. Additional fees may apply for setup, monthly maintenance, and handling chargebacks. Businesses that handle high-risk industries (such as those with frequent chargebacks) may face higher fees and stricter terms​.

Ultimately, a merchant account is a crucial tool for businesses looking to offer flexible payment options to their customers. It allows them to process transactions efficiently while also managing fraud risks.

What Is a Merchant Services Broker?

A merchant services broker is a professional who serves as an intermediary between businesses and payment service providers (PSPs). The broker’s main function is to assist businesses in selecting the most appropriate and economical payment processing solutions, such as point-of-sale systems, credit card processing, mobile payment options, and virtual terminals.

A merchant services broker helps businesses in these ways:

• To recommend suitable payment solutions, brokers assess a business’s needs, considering transaction volumes and industry type.
• Brokers evaluate PSPs by analyzing pricing, contract terms, and services to identify dependable, cost-effective solutions.
• Brokers negotiate with PSPs for better fees and terms, leveraging their relationships to secure favorable business rates.
• Brokers assist with the merchant account application process, ensuring smooth documentation handling, especially for high-risk businesses.
• Brokers provide ongoing support after account setup, helping businesses optimize payment systems and resolve issues.

Employing a merchant services broker can save businesses time and effort and potentially reduce costs. They offer customized solutions and serve as a single point of contact for payment-related questions. This service is precious for businesses new to payment processing or unhappy with their current providers.

They can also help business owners dissatisfied with their current merchant account and need assistance obtaining one for various reasons. Merchant brokers are frequently successful in obtaining merchant accounts for businesses that could not do so independently due to their extensive experience and industry connections.

They serve as a guide for business owners, assisting them in navigating the complex universe of merchant accounts and payment cards and determining the best answer for their specific requirements.

Responsibilities of a Merchant Services Broker

As mentioned, a merchant services broker is a professional who assists businesses in finding and implementing suitable payment processing solutions. This support is crucial for companies looking to accept card payments but find the array of options from different payment providers and the technical requirements of hardware and software overwhelming. Here’s what a merchant services broker typically does:

1. Helps in Evaluation:

Brokers evaluate a business’s requirements, considering factors like transaction volume, type of business, and preferred payment methods, whether in-store, online, or via mobile. This evaluation helps identify the most suitable payment processing solutions for the company.

2. Merchant Account Application Assistance:

Obtaining a merchant account can be challenging, particularly for startups or businesses considered “high-risk.” Brokers facilitate this process by compiling necessary documents such as:

• Detailed business plans.
• Bank statements.
• Credit checks.
• Tax information.
• Average transaction volumes.
• Credit card processing history.
• Current and past chargeback ratios.

They use their relationships with banks to enhance the likelihood of account approval. They often have established relationships with multiple acquiring banks, increasing the possibility of finding a financial institution that fits your business type.

3. Negotiating Rates:

While certain fees set by card networks and issuers are non-negotiable, payment processors often have variable markups. A merchant broker negotiates with these processors to obtain the most favorable rates, frequently securing better terms than businesses might manage independently. This is especially beneficial for companies with high transaction volumes.

For businesses that handle many transactions, even a slight decrease in fees—which usually vary from 1% to 4% of the transaction amount—can lead to substantial savings over time. Additionally, they can help you identify merchant service providers that charge exorbitant fees or have a history of deceptive practices, ensuring you get the best deal possible for your business.

4. Providing Access to Payment Hardware and Software:

Once you have a merchant account and service provider, you will need a way to accept credit card payments. Brokers assist in setting up the essential hardware and software for payment acceptance.

This service includes installing point-of-sale (POS) systems, card readers, virtual terminals, and secure online payment gateways. For brick-and-mortar locations, brokers may also help acquire or lease equipment like credit card terminals and mobile payment devices.

5. Ongoing Support:

The broker’s role continues after the setup. They continue to support the business, addressing any operational issues, such as resolving technical difficulties or renegotiating terms based on evolving business needs.

6. Saving Time and Reducing Complexity:

By working with a broker, businesses can save considerable time and reduce the complexity of setting up payment processing systems. Instead of dealing with multiple providers and navigating intricate fee structures independently, business owners can rely on a broker to handle these tasks efficiently, freeing them to focus on expanding their business.

How Can Your Business Benefit from a Merchant Services Broker?

Working with a merchant services broker can bring several advantages to your business, especially when navigating the complexities of payment processing. Here are some key benefits:

• Expert Guidance:

A merchant services broker acts as an intermediary between your business and payment providers, helping you navigate the vast array of options available. They possess deep industry knowledge, allowing them to identify the most suitable solutions tailored to your business needs, such as transaction volume and industry-specific requirements.

• Simplified Comparison:

Brokers can compare different payment service providers based on your business’s specific needs, such as transaction fees, customer support, and integration options. With their knowledge, they can break down complicated fee structures, allowing you to make a well-informed decision​.

• No Upfront Fees:

Many merchant services brokers do not charge businesses directly; they earn commissions from payment providers. This arrangement can make it easier for small businesses to access professional advice without incurring additional upfront costs​.

• Tailored Solutions for High-Risk Businesses:

If your business falls into a high-risk category (e.g., adult entertainment, online gambling, etc.), getting approval for merchant accounts can be more challenging. Brokers specializing in high-risk industries can help you navigate these complexities and find solutions that work for your business, ensuring you can still accept credit card payments despite the challenges​.

• Faster Problem Resolution:

Since brokers have established relationships with payment providers, they can often resolve payment-related issues faster than you would by dealing with the provider directly. This ensures that your business can maintain smooth payment processing with minimal downtime​.

• Access to International Payment Options:

For businesses expanding globally, brokers can help identify providers that support international transactions and multiple currencies. This is particularly useful for e-commerce businesses that must accept customer payments worldwide​.

How to Choose a Merchant Services Broker?

When selecting the ideal credit card processing broker, here are some things to consider:

• Trade Association Affiliation

When looking for a trustworthy merchant services agent, it’s essential to consider their affiliations and reputation. A legitimate agent will often be associated with a trade association and recommend reputable service providers.

Additionally, you can check with reputable organizations such as Trading Standards or Citizen’s Advice to verify a broker’s legitimacy.

By doing your due diligence and researching the agents and their recommended providers, you can be confident that you’re working with a legitimate and trustworthy agent who will help you find the best merchant account solution for your business.

• Independent Reviews

When searching for a reputable merchant services broker or consultancy group, reading independent reviews can be an excellent way to get a sense of the quality of service you can expect. It’s essential to rely on something other than the studies and testimonials on the broker’s website, as these may only be unbiased. Instead, check reputable review sites such as Trustpilot or Verified-Reviews to get a more accurate picture of the broker’s reputation and the feedback from their clients.

Reading these reviews can help you understand the broker’s expertise, experience, and service quality level. It will also give you insight into the broker’s customer service, which is important when choosing a merchant services provider.

• Customer Support Availability

A legitimate broker should be easily reachable by phone or online, with a dedicated customer service team to assist you with any questions or concerns. The absence of live customer support could be a red flag, indicating a potential scam.

Furthermore, a broker who is not easily contactable may not be able to help you resolve any payment issues that may arise, which could disrupt your business operations. Check the broker’s website or online presence for contact information and contact them to ensure they are responsive and easy to communicate with.

• Marketing Tactics

When searching for a reliable merchant services broker, avoiding those relying heavily on aggressive marketing tactics is essential. Instead of falling for a firm’s constant telemarketing calls, choose a broker based on personal recommendations or positive independent reviews.

This will give you a better idea of the quality of service you can expect and help you avoid any potential scams. Personal recommendations from other business owners or positive reviews from satisfied clients indicate that you work with a trustworthy and experienced broker.

They will likely have a proven track record of providing quality service, and you can be confident that they will help you find the best merchant account solution for your business.

Other Things to Consider When Selecting Merchant Services Broker

Several factors should be considered when selecting a payment processing broker to ensure you choose a provider that meets your business needs and protects your financial interests.

1. Fee Structure and Costs

Merchant service brokers often work on commission, and the fee structure can significantly impact your profitability. Standard fees include transaction fees, monthly maintenance fees, setup charges, and equipment costs. Consider transparent pricing and avoid providers with hidden fees or overly complex fee structures.

Brokers might favor services with higher commissions, so understanding the costs upfront is crucial to avoid unexpected expenses later on.

2. Payment Methods and Flexibility

Different businesses require support for various payment methods, such as credit/debit cards, mobile payments, or contactless options.

Ensure the provider supports your customers’ payment types, in-person and online. If your business is expanding, select a payment processing broker that offers scalable solutions and can handle future growth.

3. Security and Compliance

Payment security is essential to protect your business and customers from fraud. Ensure the broker provides services compliant with Payment Card Industry Data Security Standards (PCI DSS) and offers encryption and fraud prevention tools. A broker that prioritizes security will help you avoid costly breaches and penalties.

4. Customer Support and Reliability

Payment processing is critical to your operations, and issues can directly affect revenue. Choose a broker whose providers offer reliable customer support, ideally 24/7, through multiple phone, email, or live chat channels. A proven track record of uptime and reliable processing systems will minimize disruptions.

5. Contract Terms

Carefully review the contract terms to avoid being locked into unfavorable long-term agreements. Be aware of early termination fees, renewal clauses, and conditions for upgrading services. Look for flexible contract options that allow you to switch providers if needed without incurring significant penalties.

6. Integration with Existing Systems

The broker’s payment solutions should integrate smoothly with your existing systems, such as your point-of-sale (POS), e-commerce platform, and accounting software. This will streamline operations and reduce the potential for errors during transaction processing.

Conclusion

A merchant broker is vital in helping businesses find the proper merchant account that best meets their needs. They have the knowledge and connections to help business owners navigate the complex process of setting up a merchant account.

Their expertise helps businesses navigate complex payment options, negotiate better rates, and ensure the smooth operation of payment systems. This support is especially beneficial for businesses new to electronic payments or those facing challenges with high-risk classifications. By partnering with a merchant services broker, companies can focus on growth while leaving the intricate details of payment processing to a trusted expert.

Frequently Asked Questions