--- title: How Merchant Services Work description: Describing how merchant services work is complex, but we’ve got six facts to help you understand the process. image: https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/merchant-services.svg --- [tel:1-800-601-0230](tel:1-800-601-0230) 800-601-0230 - Features - Solutions - Developers - [Pricing](https://www.payjunction.com/payments/pricing.html) - Resources [See a Demo](https://www2.payjunction.com/tour-payjunction) Features - EXPLORE PRODUCTS [No-code Payments Integration®](https://www.payjunction.com/payments/no-code-payments-integration.html) [ZeroTouch Terminal](https://www.payjunction.com/payments/smart-terminal.html) [Portable Terminal](https://www.payjunction.com/payments/portable-credit-card-reader-terminal.html) - ACCEPT PAYMENTS [Invoices](https://www.payjunction.com/payments/electronic-invoices.html) [ACH Electronic Checks](https://www.payjunction.com/payments/ach-payments.html) [SmartSurcharge®](https://www.payjunction.com/payments/smart-surcharge.html) [Cards on File](https://www.payjunction.com/payments/store-credit-card-info.html) [Rapid Refunds](https://www.payjunction.com/payments/credit-card-refund.html) [Recurring Billing](https://www.payjunction.com/payments/recurring-payments.html) [Ecommerce](https://www.payjunction.com/payments/ecommerce-merchant-services.html) [Mobile App](https://itunes.apple.com/us/app/payjunction/id1324839420?ls=1&mt=8) - EXPLORE CAPABILITIES [Overview](https://www.payjunction.com/payments/payment-processing-solutions.html) [Integration Marketplace](https://integrations.payjunction.com/) [Remote Signature](https://www.payjunction.com/payments/signature-capture.html) [Multi-Location](https://www.payjunction.com/payments/enterprise-payments.html) [Sales Reports](https://www.payjunction.com/payments/sales-reports.html) [Search and Export](https://www.payjunction.com/payments/transaction-history-search.html) [Customization](https://www.payjunction.com/payments/custom-payment-software.html) Solutions - [Veterinary Streamline payment workflows and get paid faster with up-front deposits and payment schedules for high-cost procedures. 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Get automated reports for simplified end-of-day close and save on processing fees.](https://www2.payjunction.com/automotive-merchant-services) Developers - [API Documentation See how to embed omnichannel payment features into your software, using your choice of our intuitive integration methods.](https://developer.payjunction.com/) - [Developer Experience Explore the developer journey and learn how our full-service partnership model helps you maximize merchant payment adoption rates.](https://www.payjunction.com/payments/payment-api.html) - [No-code Payments Integration® Rapidly integrate payment acceptance features into any SaaS application in minutes using our easy-to-use Chrome browser extension.](https://www.payjunction.com/payments/no-code-payments-integration.html) - [Integration Marketplace Check out our growing marketplace of integrated solution partners that streamline payment acceptance and help businesses automate and scale.](https://integrations.payjunction.com/) [Pricing](https://www.payjunction.com/payments/pricing.html) Resources - [About Us Learn how our people-first culture at PayJunction helps us earn widespread recognition and awards.](https://www.payjunction.com/payments/about.html) - [Careers Join us in our pursuit to deliver exceptional experiences to customers and partners.](https://www2.payjunction.com/careers) - [Support Get helpful information about how to use features, troubleshoot problems and contact us.](https://support.payjunction.com/) - [Blog Gain useful insights into payment industry trends and PayJunction solutions.](https://blog.payjunction.com/) - [Guides Up your payment processing knowledge with our in-depth eBooks and White Papers.](https://guides.payjunction.com/) - [Tutorials Read articles and watch videos about how to use valuable features on the PayJunction platform.](https://blog.payjunction.com/topic/pj-university) # How Merchant Services Work ![How Merchant Services Work](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/merchant-services.svg) [![Picture of Ursula Librizzi](https://blog.payjunction.com/hs-fs/hubfs/Ursula_Librizzi.jpg?width=48&height=48&name=Ursula_Librizzi.jpg) Ursula Librizzi](https://blog.payjunction.com/author/ursula-librizzi) 5/2/2019 There isn’t a single answer to the question “How do merchant services work?” Merchant services is complex. On the surface, it seems self explanatory, but peel back the layers and the intricacies are revealed. When it comes to explaining how merchant services work, it’s important to explain all aspects of it. Below, we state and describe six facts that relate to how merchant services work. ## 1. Merchant services is powered by multiple providers. The truth is there is not a single provider that powers merchant services. Yes, businesses seeking merchant services can work with a single provider, but even in that scenario there are [various providers working in the background](https://blog.payjunction.com/credit-card-processing-middlemen/), in conjunction with that single provider, to make merchant services work. From the general public’s view, the two types of providers they’d recognize as providers of merchant services are [Payment Facilitators](https://blog.payjunction.com/payment-facilitator-definition/) and Merchant Service Providers. Without one of these providers, a business wouldn’t be able to initiate the first of many steps to a credit card payment. Once initiated, other players lend a hand in completing the multi-step process (More on that next), these include: - Card Associations - Card Networks - Issuing Banks - Acquiring Banks - Payment Processors - Payment Gateways ## Payment Processing Demo Schedule 15 minutes with a payments expert Get a customized PayJunction product walk-through Understand requirements and pricing Determine your SAVINGS! GET DEMO NOW ## 2. Merchant services is a multi-step process. From customer to business, a [six step](https://blog.payjunction.com/credit-card-processing-diagram/) process takes place to authorize a credit card: 1. The customer swipes or inserts a credit card. 2. The transaction is sent to the processor. 3. The transaction is relayed to the network. 4. Funds are checked. 5. An approve or deny code is issued. 6. Funds are transferred. What happens in a matter of seconds involves an intricate web of connections between various providers in the payments space. ## 3. The cost of merchant services has a direct relationship with risk. Of course, like most things in this world, there is a cost to merchant services. The payment industry has crafted three primary rate plans for businesses to choose from, all of which were built in a way to accommodate for the risk involved in a credit card transaction. These [rate plans](https://blog.payjunction.com/best-credit-card-processing-plan/) include Flat, Tiered, and Interchange-plus. The risk of a transaction is based on a few things: card type, transaction method and what information is captured during the transaction. [Flat pricing](https://blog.payjunction.com/interchange-plus-pricing-flat/) accommodates for risk by charging an “all encompassing” fee for any transaction type. [Tiered pricing](https://blog.payjunction.com/interchange-plus-pricing-tiered/) groups transactions into buckets based on their risk, each with a corresponding cost that, you guessed it, is directly related to the level of risk for that tier. Interchange-plus is more forgiving as the cost associated to the risk is only tied to [Interchange](https://blog.payjunction.com/interchange-definition/), the wholesale cost of a transaction, then the provider adds its own, consistent markup to create Interchange-plus. ## 4. True merchant services requires an application. Before you can actually start using merchant services, you need to go through an [application process](https://blog.payjunction.com/merchant-account-setup/) to gain access to a merchant account. This is for true merchant services provided by a Merchant Service Provider, but with a Payment Facilitator, an application is usually not required. Opting for merchant services via a facilitator may seem easier, and it is, initially. However, down the line you may face [held funds](https://blog.payjunction.com/paypal-holding-funds/) and high transactional costs as you increase sales. With a true [merchant account](https://blog.payjunction.com/merchant-account/), you gain customized pricing for your business, dedicated support and resources. ## 5. Merchant services can vary by business size. Depending on where your business stands, and where you see it going, certain providers may not be a good fit. You want to make sure your merchant services is flexible so it can change as your business evolves. Whether your business is small, multifaceted or enterprise, there is the [right merchant services](https://blog.payjunction.com/merchant-service-provider/) out there for it. Consider size, sales volume, how sales are taken and how you’d like to grow your business when considering a provider. ## 6. Merchant services may require equipment. Unfortunately, merchant services doesn’t work by the wave of a magic wand, though some might think so when it comes to online purchases. However, so much happens behind the scenes to make e-commerce transactions happen. For in-person transactions, however, equipment is required. A credit card reader that can process all transaction types is ideal to ensure you are able to accommodate all customer preferences and all the latest (and most secure) technology in payments. ## Learn what to compare across Merchant Service Providers. [![START NOW](https://no-cache.hubspot.com/cta/default/635739/174f79cc-fd78-40cd-9725-25a869c6f3bd.png)](https://cta-redirect.hubspot.com/cta/redirect/635739/174f79cc-fd78-40cd-9725-25a869c6f3bd) What fact surprised you about merchant services? Tell us below, we’d love to hear from you. [Questions and Answers](https://blog.payjunction.com/topic/questions-and-answers) --- ##### [![How to Set Up ACH Payments: 4 Crucial Things You Need to Know](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/How-to-set-up-ACH-payments.svg) How to Set Up ACH Payments: 4 Crucial Things You Need to Know](https://blog.payjunction.com/how-to-set-up-ach-payments) ##### [![Recurring Payment Processing: How to Automate With PayJunction](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/recurring-billing-payjunction.svg) Recurring Payment Processing: How to Automate With PayJunction](https://blog.payjunction.com/recurring-billing-payjunction) ###### About Author ![Picture of Ursula Librizzi](https://blog.payjunction.com/hs-fs/hubfs/Ursula_Librizzi.jpg?width=200&height=200&name=Ursula_Librizzi.jpg) ### Ursula Librizzi Ursula is the sales and marketing operations manager for PayJunction. She oversees daily marketing tasks and liaises between the sales and marketing departments. ###### Related Posts ## [![Are You Paying the Lowest Possible Debit Card Fees?](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/debit-card-fees.svg) Are You Paying the Lowest Possible Debit Card Fees? You may sometimes wonder if the payments industry has your best interest in mind. At PayJunction, we believe in ethical billing, as we’ve outlined in our ongoing unethical billing series. Our goal is to educate the business community about unfair billing practices.](https://blog.payjunction.com/debit-card-fees) ## [![How to Compare Merchant Processing Services](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/merchant-processing-services.svg) How to Compare Merchant Processing Services Are you researching merchant processing services? Before you start considering providers, you first need to understand how to compare what is available to you. Merchant processing services differ across providers, and there are certain characteristics and features you should pay attention to when evaluating your options.](https://blog.payjunction.com/merchant-processing-services) ## [![Are You Sure You’re Paying True Interchange?](https://blog.payjunction.com/hubfs/BLOG/FEATURED%20IMAGES/interchange-criteria.svg) Are You Sure You’re Paying True Interchange? If your business is on Interchange pricing, you may think you have the most transparent rate plan. This is a fair assumption, so long as you’re being charged true Interchange.](https://blog.payjunction.com/interchange-criteria) ## Meet a Payment System You’ll Love - ###### FEATURES [No-code Payments Integration®](https://www.payjunction.com/payments/no-code-payments-integration.html) [ZeroTouch Terminal](https://www.payjunction.com/payments/smart-terminal.html) [Portable Terminal](https://www.payjunction.com/payments/portable-credit-card-reader-terminal.html) [Invoices](https://www.payjunction.com/payments/electronic-invoices.html) [ACH](https://www.payjunction.com/payments/ach-payments.html) [SmartSurcharge®](https://www.payjunction.com/payments/smart-surcharge.html) [Cards on File](https://www.payjunction.com/payments/store-credit-card-info.html) [Recurring Billing](https://www.payjunction.com/payments/recurring-payments.html) - [Ecommerce](https://www.payjunction.com/payments/ecommerce-merchant-services.html) [Customization](https://www.payjunction.com/payments/custom-payment-software.html) [Remote Signatures](https://www.payjunction.com/payments/signature-capture.html) [Rapid Refunds](https://www.payjunction.com/payments/credit-card-refund.html) [Multi-Location](https://www.payjunction.com/payments/enterprise-payments.html) [Sales Reports](https://www.payjunction.com/payments/sales-reports.html) [Search and Export](https://www.payjunction.com/payments/transaction-history-search.html) [Mobile App](https://itunes.apple.com/us/app/payjunction/id1324839420?ls=1&mt=8) - ###### BUSINESS SOLUTIONS [Auto Dealers](https://www2.payjunction.com/automotive-merchant-services) [Veterinary](https://www2.payjunction.com/payment-processing-veterinarians) [Dentistry](https://www2.payjunction.com/payment-processing-dentists) - ###### RESOURCES [Product Overview](https://www.payjunction.com/payments/payment-processing-solutions.html) [Integrations](https://integrations.payjunction.com/) [Blog](https://blog.payjunction.com/) [Guides](https://guides.payjunction.com/) [Support](https://support.payjunction.com/) [Service Status](https://status.payjunction.com/) [Tutorials](https://blog.payjunction.com/tag/pj-university/) [API](https://www.payjunction.com/payments/payment-api.html) - [Trust Center](https://trust.payjunction.com/) [Request a Demo](https://www2.payjunction.com/payjunction-demo) [Pricing](https://www.payjunction.com/payments/pricing.html) [About Us](https://www.payjunction.com/payments/about.html) [Careers *HIRING*](https://www2.payjunction.com/careers) [Press](https://media.payjunction.com/) - ###### RESOURCES [Integrations](https://integrations.payjunction.com/) [Guides](https://guides.payjunction.com/) [Tutorials](https://blog.payjunction.com/tag/pj-university/) [API](https://www.payjunction.com/payments/payment-api.html) [Request a Demo](https://www2.payjunction.com/payjunction-demo) [About Us](https://www.payjunction.com/payments/about.html) [Careers *HIRING*](https://www2.payjunction.com/careers) [Press](https://media.payjunction.com/) [Trust Center](https://trust.payjunction.com/) [Service Status](https://status.payjunction.com/) - ###### BUSINESS SOLUTIONS [Auto Dealers](https://www2.payjunction.com/automotive-merchant-services) [Veterinary](https://www2.payjunction.com/payment-processing-veterinarians) [Dentistry](https://www2.payjunction.com/payment-processing-dentists) ##### 800-601-0230 SIGN UP FOR OUR NEWSLETTER  Become a better advocate for your business. 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