Are you up-to-date on all the features and components of a payment service provider? The marketplace for credit card processors has experienced some changes over the past decade. Modern technology, however, continues using several of the industry’s original terms.
Conducting customer transactions through a merchant account could possibly generate some confusion, especially when used in connection with a multifeatured and innovative ISO. Some terms may appear to have different meanings than they have in the real world of electronic transactions. Other terms may also be used interchangeably. To help clear things up, here’s a refresher on some of today’s more commonly used terms.
Independent Sales Organization
An independent sales organization may also be referred to as a member service provider or MSP. An ISO offers its merchant services and products to businesses that need to process their customers’ credit card payments and other electronic money transactions. Each partner within the ISO can have its own acquiring banks.
By connecting several credit card processors and payment service providers, an ISO enables a merchant to connect with as many other relevant entities as possible. Collaborating through a trusted network enables a business to offer its products and services to a wider audience. The added benefit for merchants is the reassurance of knowing they are receiving payments through verified partners.
Payment Service Provider
When a customer is ready to pay for a product or service, the payment service provider, or PSP, connects the parties to the sending and acquiring banks so the payment transaction can take place. Instabill, for example, acts as a safe and efficient electronic central-connection point where financial institutions, customers and merchants can come together to complete a transaction.
A payment service provider typically uses its own unique or specialized method for processing transactions. It can, for example, validate and complete a customer’s payment quickly when it has nurtured existing partnerships with a wide range of commercial banks. This can make a significant difference; a new or an unknown payment service provider may otherwise take longer to connect, which could cause an impatient customer to “cancel” a purchase.
Credit Card Processor
A credit card processor acts as a facilitator between the merchant’s acquiring bank and the bank issuing a customer’s credit card. Its primary responsibility is ensuring that a merchant receives the funds from a customer’s credit card transaction, whether a purchase is made online or through a point of sale terminal. Credit card processor may also be used as an “umbrella term” to describe the intermediary companies that enable customers, businesses and financial institutions to communicate and move funds between them.
A merchant account generally refers to the financial-services account that a business sets up to receive a customer’s credit card and electronic payments. The account enables proceeds from a customer’s debit or credit card payments to be deposited in the business’s bank account.
The acronym stands for mail order/telephone order, which means a merchant can accept payments by mail, telephone and through the internet. The business’s transactions do not require the physical presence of a credit card. Because of the risk of fraud, a MOTO merchant business must be able to identify and restrict compromised transactions before they are processed.
POS / Point of Sale Terminal
Payment terminals have evolved over the past years from bulky machines to slick mobile phone apps. When a business has a physical location, accepting payments through a mobile device can provide customers with a more convenient transaction.
A traditional POS terminal works by swiping or inserting a credit card into a slot connected to a cash register to process a customer’s payment. Modern POS terminals use wireless internet connections to accept payments through smartphones, tablets, or other portable devices. Payments can be accepted wherever the customers are, whether they are inside a store, sitting in a vehicle or at a restaurant table.
Internet Merchant Accounts
Businesses that offer products or services online require specialized merchant accounts that can process credit card purchases made entirely through the internet. Because a physical card is not part of the process, an internet merchant account should be capable of reliably and quickly determining if a transaction is an attempt at fraud or identity theft.
Depending on the type of online business, an internet merchant account may also be required to process a variety of currencies. Internet businesses selling and shipping products internationally benefit from being able to accept payment in currencies such as euros or British pounds.
Secure Socket Layer
When offering products or services over the internet, showing visitors that a website has verified SSL credentials establishes trust between a business and its customers. A payment system that integrates an additional security layer through encryption can help provide customers with the confidence that processing payments through the site is safe.
Customers may no longer have the patience to input a substantial amount of data into a website to make a credit card payment. Real-time processing means that data is streamed instantaneously between a credit card issuer and the payment service provider. Requiring a minimal amount of time to process a transaction helps customers make their purchases quickly and smoothly. It can also provide an incentive for a customer to return to a website for future purchases.
Subscription-based services provide a business with a steady flow of repeat orders. Asking customers to leave a credit card on file for a subscription requires a high degree of trust. Customers may require additional assurance that their information is secure from hackers before authorizing a business to maintain their payment information to process recurring transactions.