9 Best Merchant Service Providers & How to Choose (2024) - Shopify (2024)

Consumers want to have freedom and control when choosing how to pay for their products.

Globally, non-cash transactions are growing 16.6% a year. Based on a 2023 report analyzing 40 markets, credit card transactions are on the rise, and digital wallets like Alipay and Apple Pay account for 49% of all consumer spending.

For your retail business, merchant services are crucial because they give your customers freedom, flexibility, and control over payments.

Ahead, you’ll learn how merchant services work, how much they cost, the steps to choosing the best provider for you.

What are merchant services?

Merchant services is a set of tools companies use to accept credit cards, debit cards, and other electronic payments. It’s an essential setup for any business that wants to offer payment methods beyond cash—ecommerce businesses and brick-and-mortar stores included.

With merchant services, you can process payments from credit cards and debit cards, contactless payments, ACH payments, mobile payments, store credit, and gift cards.

A merchant service provider acts as an intermediary between your business, your customer, and a financial institution—your bank. It facilitates a seamless transaction through a secure and rather complex process in the back end.

1. Your customer presents their payment method, like entering payment details online or swiping a credit or debit card on your point of sale (POS) terminal.
2. Your merchant services provider sends payment information to your bank.
3. Your bank sends the transaction to your merchant service provider and the card company, like Visa, Mastercard, or American Express.
4. The card company sends the transaction to the issuing bank (customer’s bank) and requests approval.
5. The customer’s bank either approves the transaction and sends an approval code to the card company, or declines the transaction.
6. The card company sends the approval code to your bank.
7. Your bank sends the approval code to your payment terminal.
8. Your payment terminal confirms the transaction and prints a receipt.
9. The customer’s card or bank account gets charged the amount on the receipt.

All of this happens seamlessly and in only a few moments.

Merchant services vs. merchant account

A merchant account is a business bank account that accepts digital payments. When a customer makes a purchase using a credit card or electronic payment, the merchant account communicates with the card issuer and receives the funds from the customer’s account. Getting a merchant account with an acquiring bank is easy if you have a business license.

What do merchant services include?

Your merchant services provider collects your customer’s transaction and payment details, receives authorization from the issuing bank, collects the payment, and sends it to your bank account.

Here are the types of services and tools many merchant service providers offer:

Payment processing

Payment processors are payment solutions necessary for accepting cash, credit card payments, debit card transactions, mobile wallets, and other forms of electronic payments. This allows you to receive funds into your merchant account.

Payment gateway

Secure payment gateways are the technological platforms that process online payments from your online store. It ensures you can safely process payments with credit and debit cards.

Payment terminal

A physical payment terminal is the brick-and-mortar equivalent of a payment gateway in an online store, like a chip and PIN machine. It’s a piece of hardware where a customer swipes, dips, or taps their card—or taps their NFC- or RFID-enabled mobile device—to make a purchase.

POS system

A point-of-sale system (POS) is a physical, in-store terminal and back-end software that tracks sales, stock levels, and customer information. It also provides frictionless shopping options for businesses with a physical presence, like buy online, pickup in-store (BOPIS), and browse in-store, buy online.

Mobile payment system

Use your smartphone or tablet as a credit card terminal. It works thanks to a mobile card reader that connects to your device, as well as a mobile app that passes payment information onto your payment processing network.

Shopify’s POS Go is a more powerful version of a mobile payment system with a built-in barcode scanner, secure payments with any payment method, and full integration with the store’s back office.

Virtual terminal

A virtual terminal is software that lets you take in and process payments without the card physically present, such as over the phone or on the computer.

Integrations with third-party providers

The best merchant services providers will allow you to customize your payment processes and methods based on your industry and the markets you want to sell on. And sometimes, they do this through third-party integrations.

For example, if you want to offer easy checkout to customers located in the Netherlands who want to pay in euros, you may want a merchant services provider that offers an integration with iDEAL, the Netherlands’ ecommerce payment system.

Loyalty programs and rewards

You can lean on merchant services for loyalty programs and rewards, a feature that lets you automatically and instantly reward repeat buyers. It matches customer purchases with their profile and previous activity.

9 best merchant services providers in 2024

If you’re looking for a merchant services provider, here are five leaders in this space for you to consider. The best option will depend on your business type, size, and needs—there’s something on this list for everyone.

1. Shopify

Shopify enables merchants to build an online store and can sell their products anywhere: on their website, in a brick-and-mortar store, in pop-up shops, and across social media channels.

Crucially, Shopify lets you accept credit cards and use dozens of payment solutions to sell to customers globally. Thanks to Shopify Payments, you’ll get access to credit card processing online (and in person, if you need it) and fraud prevention—all transactions automatically go through fraud analysis.

You can also set up local payment methods for customers shopping in specific markets.

And because Shopify is a full point-of-sale system, you also get an integrated back office with inventory management, customer profiles, marketing functions, detailed reports, and omnichannel checkout options. No long-term contracts means you get full flexibility and freedom.

Features:

• Seamless integration with Shopify stores
• Multiple payment options including credit cards and Shop Pay
• Real-time reporting
• Chargeback protection through Shopify Protect
• BNPL payment options via Shop Pay Installments

Pros:

• Smooth setup and operation
• Lower fees
• Single dashboard
• Fast payouts
• Integrated inventory

Cons:

• Shopify Payments is available only to stores in certain countries

Cost: Monthly store plans start at $29 per month; there are no transaction fees for stores using Shopify Payments, however, there are credit card processing fees that vary depending on the plan you choose. Using third-party payment providers has additional fees of 2%, 1%, or 0.5% for Basic Shopify, Shopify, and Advanced Shopify plans.

2. Helcim

Helcim is a payment solution that lets you accept payments in the store, on the go, and online.

Helcim offers recurring payments, invoicing, international payments, a customer portal, and customer relationship management. Its card reader and virtual terminal can be used to take payments on a computer, tablet, or smartphone.

Helcim provides volume-based discounts, so the more transaction amount you have, lower processing fees become more available to you. You can reach Helcim customer support via phone or email.

Features:

• Interchange-plus pricing
• No long-term contracts
• Includes

Pros:

• Transparent pricing
• Discounted pricing tiers
• No monthly fees

Cons:

• No option for same-day deposits

Cost: Five tiers of fees based on monthly processing volume; in-person payments start at 0.15% + 6¢, keyed and online transactions start at 0.15% + 15¢; ACH payments are 0.5% + 25¢; no monthly fees.

3. Square

With Square, you can accept payments in person, online, remotely (like ACH transfer), and over the phone. Square’s hardware includes a reader for chip cards and contactless cards, a terminal, a magnetic stripe reader, an iPad point-of-sale device, and a cash register.

Features:

• Offers hardware, software, and payment processing
• Customer support through phone or email

Pros:

• No long-term contracts
• No hidden fees
• No hardware leases or return fees
• Fast, reliable transfers in 1–2 days or even same-day

Cons:

• Flat rate pricing is easier to understand but can also be more expensive

Cost: Between 2.6% + 10¢ per in-person transaction, 2.9% + 30¢ for cards or 1% with a minimum $1 per transaction for ACH bank transfers (invoices only), and 3.5% + 15¢ online, manually entered, or invoice payments. Monthly plans with advanced features from $29 per month.

4. Stripe

Ecommerce stores can use Stripe to accept online payments in more than 135 currencies, use pre-built payment pages, manage online subscriptions, and issue invoices.

Stripe features an application programming interface (API) that allows it to integrate with payment methods worldwide, like Alipay in China or iDEAL in the Netherlands. It is also known for its fraud detection.

Features:

• International currency payment processing
• Online and in-person payments
• Compatible with 100+ payment methods
• One-click checkout

Pros:

• Flat rate, transparent pricing
• Great for global businesses
• No monthly or cancellation fee
• No setup fee

Cons:

• High currency conversion and other hidden fees
• Better for online payments
• Requires technical resources

Cost: 2.9% + 30¢ per successful card charge; 0.8% per ACH direct debit.

5. Stax

Stax (formerly Fattmerchant) is an all-in-one payment processing platform that enables businesses to take payments in person, over the phone, online, and on mobile and invoice customers and clients.

The pricing Stax offers caters to growing and large businesses, due to a monthly fee that starts at $99. However, there’s a 0% markup on direct-cost interchange, which makes monthly costs more predictable.

Features:

• Invoicing
• Payment reporting
• Multiple payment types
• Customer support via phone and email

Pros:

• Predictable pricing—single monthly fee
• Customizable

Cons:

• Customer reviews report questionable business practices

Cost: Plans start at $99 per month.

6. Clover

Clover is a full-service POS system and merchant service provider. It has software and hardware with features for online and in-person payments, as well as advanced options for things like inventory management and customer loyalty programs. Clover charges a monthly subscription fee on top of transaction fees.

Features:

• Online and in-person payments
• Full POS system
• Additional offerings like Clover Capital

Pros:

• Full-featured for both retail and ecommerce operations

Cons:

• Non-refundable and non-cancellable
• Requires a monthly subscription plus transaction fees
• Unpredictable and non-transparent pricing

Cost: 2.3% + 10¢ per transaction. Monthly subscription fees also apply but are not publicly advertised.

7. Chase

Chase is a major US bank that has a suite of tools for retail businesses, including Chase Payment Solutions merchant services. Chase has everything you need to accept credit cards online or in-person via its POS. You can use its payment terminals, mobile apps, POS integrations, and accept payments by phone or payment link.

Features:

• Retail POS available
• Virtual terminal and payment gateway

Pros:

• Fast and reliable funding; even same-day
• No hidden fees
• Solid security

Cons:

• Only for US payments
• Charges a monthly fee and a transaction fee

Cost: Monthly subscriptions are required, starting at $9.95 per month. Transaction fees are 2.6% + 10¢ for tap, dip, or swipe; 3.5% + 10¢ for manually keyed transactions or payment links; and 2.9% + 25¢ for ecommerce payments.

8. Bank of America

Bank of America is another major US bank that offers merchant service solutions for retailers to process both in-person and online payments. Beyond payments, Bank of America has a POS system with accounting, employee management, inventory tracking, and other business management features.

Features:

• Accept credit and debit card, contactless, swipe, and keyed payments
• POS and mPOS for in-person transactions

Pros:

• 24/7 customer support
• No long-term contract or cancellation fee

Cons:

• Hidden fees
• Lack of transparent pricing information

Cost: Transaction fees are 2.65% + 10¢ for swipe, dip, and tap; 2.99% + 30¢ for ecommerce payments, and 3.50% + 15¢ for keyed transactions. A monthly subscription fee may also apply.

9. PayPal

PayPal is an online payment processor that has since morphed into a full payment and merchant service platform for businesses of all types and sizes. Retailers can use it to accept online payments, send invoices, offer express checkout, and even process in-person sales.

Features:

• Robust tools for online payments
• International payment options
• Embeddable payment button

Pros:

• Great for global businesses
• Well-known and trusted among consumers
• No cancellation fees or monthly fee

Cons:

• Unreliable access to funds
• Tends to side with the customer in disputes

Cost: Transaction fees vary and can be difficult to forecast. Generally, you’ll pay 4.90% + a fixed fee. However, this can be as low as 1.9% for PayPal card payments or as high as 6.5% for micropayments, for example. There’s no monthly fee.

Merchant service costs

There are three main ways your merchant services provider will charge you for processing payments: flat rate, tiered, and interchange plus.

You should also be aware of interchange fees, which are a percentage of each transaction you pay to credit card companies for processing credit or debit card payments. Card companies and banks assume the risk of fraud or payment issues on every transaction, and these fees cover that.

Flat rate

The most straightforward pricing model is flat rate. It’s usually a small percentage of the transaction plus an additional fixed fee.

An example of flat rate pricing is 2.9% + 30¢ per transaction. This structure is simple and predictable, making it easy to plan your expenses based on the number of sales you do in a given time period.

Tiered

A tiered pricing model has different pricing levels based on the level of risk the payment processor takes with each payment type.

For example, one tier can include in-person credit and debit card payments, which are usually deemed the safest and come with the lowest processing rates. The next tier can include international online payments, which come with more risk and result in higher processing fees.

Interchange plus

The interchange plus model means you’re paying the existing interchange fee plus a markup—an additional percentage or fee per transaction.

Unlike the other two pricing models, interchange plus outlines exactly what you’re paying for and uncovers any hidden fees. This can be useful to businesses looking for a provider with the most competitive pricing, but many companies, especially smaller ones, might find this level of detail overwhelming.

Incidental fees

Don’t forget about incidental fees, or the additional costs your merchant service provider may charge you. Here are some to keep in mind:

• Account setup fees
• Recurring charges for your merchant account, like an annual or monthly fee
• Minimum processing fee if you don’t meet a specified volume of transactions
• Chargeback fees if a customer disputes the charge and wins
• Payment card industry (PCI) compliance fee
• Statement fees
• Batch fees for settling many transactions at once
• Cancellation or termination fees if you cancel the service before your contract is up
• Non-sufficient funds (NSF) fee when your bank account doesn’t have the funds to cover a transaction

6 things to consider when choosing a merchant service provider

Now you know what most merchant services providers offer, and the pricing structures they might use. Here are some key points to keep in mind as you research different providers:

Pricing

Two merchant account providers might offer you the same feature set, but price them in a very different way. Look for any potential upfront costs, processing fees, and pricing structures a potential provider offers.

Flat rate is often the best for a small business; tiered and interchange plus models work better for businesses with higher sales volume. Know exactly what you’re paying for and what your bill is made of—avoid hidden fees and unexpected costs.

On top of that, pay attention to any contracts or timeline commitments your provider may require for certain pricing.

Customer support

Offering seamless transactions is essential to your customer happiness—and your cash flow. If the process gets stuck for any reason, you’re not just losing money, but also your customers’ trust and patience.

If there’s an issue with payments, how will your provider handle it? Look at review sites like G2 or Capterra to read reviews from fellow business owners and learn about their direct experience with the provider.

PCI compliance

Your provider needs to meet certain security standards to keep your customers’ transactions and payment details safe. The most important ones include PCI compliance (for handling credit and debit card information) and SOC (for privacy, processing integrity, security, availability, and confidentiality).

Find this information on your provider’s security or compliance pages.

Integrations

First, establish what you need from a merchant services provider in terms of how it works with the business tools you already have in place. This includes integrations in particular. List payment providers, shopping cart integrations, accounting software, and other systems you might want to integrate your merchant services solution with. Then find solutions that fit.

Also, think about the payment methods you want to offer. Consider credit and debit cards, ACH payments, gift cards, mobile payments, checks, electronic checks, and custom payments like split payments.

Reporting and analytics

It’s important to find a merchant services provider that also provides insight into business performance. At a minimum, you’ll want to be able to report on the number of transactions and sales volume for your business per day, week, or month. But you’ll also want to look for more advanced metrics, as well as automated options so you don’t have to build all your data reports manually.

Trial runs

Choosing a merchant services provider is a big commitment and one you shouldn’t take lightly. Look for options like free trials, money-back guarantees, or in-depth product demos before you make your final decision for a merchant services provider that will power your business.

Find the right merchant services for your business

There are two big advantages of having reliable merchant services in place. One is that your customers always have the payment options and methods they need, which means they can buy from you with ease.

The other one is your peace of mind. Cash flow is more stable because the money hits your account quickly—often within one business day. Payment processing works without your interference, so you have the time and energy to focus on your products, marketing, and customers.

Go with a provider that matches your needs and budget—the effort will be worth it.