Market Types for Merchant Services Every Business Needs

Are you interested in exploring the possibilities of accepting electronic payments such as debit and credit cards for your business? 

Merchant services are segmented by business type which includes wholesale and retail merchants, by service type, like payment gateways, mobile payment systems, and POS systems, and by market positioning, such as providers for specific industries (high-risk businesses) and those offering all-in-one platforms or mobile-specific solutions. 

As you look to securely accept payments both online and on-premise, you need to understand the essential merchant services available to you. These services can streamline your payment processes and enhance your overall business operations.

In this article, we’ll discuss the types of merchant services and their significance in the contemporary business environment. We will also provide insights on selecting the most suitable merchant services tailored to the unique needs of your business. Furthermore, we will explore emerging trends that may influence the future trajectory of this industry. 

What is The Merchant Services Market?

A merchant service market is a biosphere of companies and services that enable businesses to accept and process electronic payments from customers. This market includes payment processing, POS Systems, payment gateways and merchant accounts. All of these are provided by merchant service providers to facilitate seamless and secure transactions as well as to streamline payment operations for all business types. 

Credit card processing leads are essentially the lifeblood for businesses in the merchant services industry. These leads represent potential clients who are interested in acquiring services related to payment processing, merchant accounts, and financial transactions.

Merchant service providers usually require the merchants to have a merchant account with the provider, either directly or through a referral partner such as banks or B2B service companies. 

Below are a few of the services most commonly included in merchant service offerings:

• Payment Gateways- An interface allowing customers to submit payment information online such as debit and credit cards, that is routed to the merchant’s payment processor. 
• Online Transaction Processing- The merchant’s bank and the customer’s bank work together to ensure effortless communication, allowing the merchant service provider to transfer funds to the appropriate locations.
• Credit Card Readers – In this interconnected web, the merchant’s bank collaborates with the customer’s bank. This attempt ensures coherent communication and coordination. 
• E-Commerce Support – Providers are laying the groundwork for merchants with marketing tools designed to boost visibility and engagement. Additionally, sales analytics provides insights into performance and customer behaviour. 
• Loyalty Programs and Promotions – These programs encourage customer engagement, enhance retention and increase LTV for merchants. It makes it easier for merchants to connect with their customers in consequential ways and drive a more sustained growth. 
• Partner Networks- The third-party network providers integrate with their extensive suite of products, which enhances the overall value and functionality available to merchants.

Regardless of the service they are offering, a merchant service provider’s most important job is to ensure that every payment is accepted and processed smoothly and securely.

Processing Environment Market Types

“A company’s marketing environment consists of the actors and forces outside of marketing that affect marketing management ability to build and maintain successful relationships with target customers”. – Philip Kotler

Understanding market environments can help you identify trends and manage potential risks. A company’s marketing environment includes every element that may affect its ability to connect with its customers. This comprises internal elements such as resources, equipment and a company’s corporate structure. 

Card-Present (CP) 

A card-present transaction is a procedure that occurs when both the cardholder and the payment card are physically present at the time of the transaction. This is a common practice in traditional retail environments like grocery stores and restaurants, where customers hand over their physical credit or debit cards to the cashier for payment. 

Card-Not-Present (CNP) 

This process does not require the cardholder to present the physical card to the business. It can be in the form of online shopping or over-the-phone payments. But this is inherently a less secure procedure. 

Omnichannel

An omnichannel strategy weaves a variety of sales and service channels that include online platforms like websites, mobile applications and social media and various digital touchpoints that create a unified and cohesive ecosystem. 

And because of this, customers are able to experience a seamless journey that caters to their preferences, which fosters a deeper engagement and satisfaction. 

Provider Model Market Types

In a provider model, a business focuses on delivering services instead of tangible products. This approach encompasses multiple offerings like consulting services that provide expertise in areas like management, finance, technology or SAAS, which allows the customers to access software applications on a subscription basis. 

With a Dedicated Merchant Account, you can customize transaction rates and receive direct deposits that ensure immediate access to funds. This account type is optimal for businesses in the provider model market as it offers essential operational and strategic benefits for service-oriented businesses. 

Payment Service Providers and Aggregators deliver various customer convenience and flexibility. Managing the essential backend processes like fraud prevention, real-time monitoring and currency conversions, PSPs and Aggregators alleviate operational burdens for businesses. This allows them to focus on growth and ensures secure and efficient transactions. 

Knowing Your Risk Profile Market Types

One of the key factors is to establish a solid professional relationship with your financial advisor by conducting a thorough risk assessment. The assessment will allow your advisor to develop a personalized investment strategy that directly aligns with your financial goals, investment timeline and your emotional response to risk. 

• An individual’s risk profile describes their willingness and ability to take risks. 
• The profile plays an integral role in determining the asset allocation in their investment portfolio. 
• A risk profile can also indicate their inclination and capacity to repay a debt. 
• A company’s risk profile comprises internal and external threats that can impact its ability to conduct business. 

There are five basic risk profiles that an adviser can use to assess how much risk you can tolerate.

Risk Portrait	Investment Requirements	Investment Strategy	Investment Timeline
Conservative (Low Risk)	Stable growth and/or a high level of income.	Conservative strategy required.	Three years or less.
Moderately Conservative	Fairly stable growth and/or a moderate level of income.	Not comfortable taking risks, but requires less conservatism to generate returns.	Three years or more.
Moderate	No income required. The client can tolerate fluctuations in the anticipation of higher returns in the long term.	A moderate investment strategy is required.	Five years or more.
Moderately Aggressive	No income required. The client can tolerate a fair level of fluctuation in the investment, given the potential for higher returns.	A medium level of risk tolerance must be balanced against a longer timeline over which to recoup any paper losses incurred during the investment’s duration.	Five to ten years.
Aggressive	Substantial fluctuations can be tolerated in anticipation of the highest possible return over 10 years or more.	An aggressive strategy can be used. Although volatility will be higher in the short-term, this is offset by higher long-term returns.	Ten years

Low-Risk

Investors with a Low-Risk or also known as a Conservative risk profile prioritize the safety of their principal investment above anything else. The investment options that are best suited include treasury bills, corporate bonds, sovereign bonds and debt-based mutual funds, amongst others. They relatively have a shorter investment horizon. 

High-Risk

Investors with a high risk profile thrive on the rollercoaster of market dynamics. They maintain a steadfast resolve amidst the market fluctuations and are fully committed to the long-term journey. Their resilience transforms volatility into an opportunity for strategic advancement that augments growth prospects. 

Business Size Segments

Market size segments merchants based on key characteristics such as transaction volume, monetary value, payment frequency and the time from the first to last purchase. By using these segmentation strategies, businesses can develop a more thorough understanding of the merchant portfolio which leads to customer satisfaction and improved performance. 

There is no universally agreed-upon definition for business size segments, as classifications differ by country, industry and context. Usually, businesses are segmented by number of employees, revenue and market influence. 

SMB 

• Fewer stakeholders are involved in purchasing decisions, resulting in shorter sales cycles.
• They prioritize cost-efficiency, ease-of-use and solutions that provide immediate value
• Often rely on personal relationships, reviews and referrals to make purchasing decisions. 

Mid Market

• Experience longer sales than SMBs, which can average between four to six months.
• Has a more complex organizational structure and processes than SMBs. 
• They possess larger budgets and require more sophisticated solutions than SMBs, but still prioritize a strong return on investment. 

Enterprise

• It has a complex and multilayered organizational structure with specialized departments. 
• Purchase decisions involve many stakeholders across different departments, including legal, finance and IT.
• They are heavily focused on compliance and strategic, long-term goals. 

MCC Segments (Examples)

A Merchant Category Code (MCC) is a four-digit classification system that categorizes the types of products or services offered by a merchant. This helps the payment industry classify and track transactions. The key functions of MCC Segments are:

• Determine Fees
• Trigger Rewards
• Assess Risk and Prevent Fraud
• Enables Budgeting and Reporting
• Set Spending Controls
• Aid In Tax Reporting

MCCs are grouped by industry, with different codes available. Here are some of the most common categories and examples:

• Retail & Restaurants (CP)– Grocery stores (MCC 5411), miscellaneous retail (MCC 5999), and clothing stores (MCC 5600–5699), restaurants ( MCC 5812)
• E-commerce & Subscriptions (CNP)– Digital Content and Gaming Subscriptions (MCC 5816-5818), General Merchandise (MCC 5399, MCC 5699)
• Professional Services & Healthcare– General Professional Services (MCC 8999), Healthcare (MCC 5047)
• Travel, Ticketing, Marketplaces (Often Higher Risk)– Travel agencies and tour operators (MCC 4722), Ticketing (MCC 7922, 7929), Marketplaces (MCC 3000-3299)

Pricing Model Market Types

There are different pricing models available to businesses and choosing the right one for your needs and circumstances can have a colossal impact on your company’s well-being. Companies strive to find a sweet spot that attracts customers while ensuring profitability. This is where a pricing model comes in. 

It is how a business determines the financial structure by which customers will pay for the value that they receive. Understanding the various models allows businesses to strategically choose the approach that best aligns with their target market, product or service offering and overall business goals.  

Interchange-Plus	Flat-Rate	Tiered
Allows merchants to see the exact breakdown of fees per transaction.	Businesses with straightforward products/services and uniform value delivery.	Serving multiple customer segments with different needs: Offers flexibility through various price levels based on features or volume.
It can be more cost-effective as the processor’s markup is consistent, and debit card transactions are cheaper.	Small businesses with low transaction volumes: The ease of understanding and consistent fees make it an attractive option.	SaaS companies: Allow businesses to grow with customers by offering different feature sets and upselling opportunities.
Businesses processing over $5,000/month.	Businesses prioritize operational simplicity and ease of communication.	Professional services firms: Including accounting, bookkeeping, tax, legal, and digital marketing services.
Businesses are processing a large number of PIN debit transactions.	Young SaaS startups are aiming to establish a customer base.	Subscription-based businesses: Facilitate recurring revenue streams and customer retention through tier upgrades.
Businesses that operate year-round.	Businesses with a narrow product and a single buyer persona.	Cloud computing and streaming platforms: offer different plans based on usage or quality.
Industries associated with lower interchange rates include healthcare and education.	E-commerce businesses for flat-rate shipping to simplify costs and minimize abandonment.

Conclusion

Pick your merchant services provider carefully; you don’t want to incur unnecessary costs when you can save money! Choosing a merchant service provider is not a decision a business should take lightly. There are several factors to research and weigh against your business model and needs before you decide to sign up.

Merchant services are the backbone of modern business operations. Choosing the right merchant services will empower your business and help it thrive in the dynamic and ever-evolving digital economy. 

Watch out for ongoing or hidden costs, and make sure you understand how quickly payments are processed. You should also be aware of the level of ongoing support you can expect to receive should things go awry.