Merchant services: the best tools for small business success

Making purchases using cards and digital wallets has become a routine part of daily life. For consumers, it’s as simple as tapping a card or phone. But for businesses, which are technically known as merchants in the context of payments, the process behind the scenes is more complex.

As a small business owner, you’ll need to manage several components that make quick, convenient, cashless payments possible. That’s where merchant services come in. 

Whether you’re running a brick-and-mortar retail premises, a market stall, or an online business, merchant services cover all the necessary elements that work together to make transactions happen.

This guide explains merchant services for small businesses, helping you understand what’s involved for hassle-free and reliable transactions. If you’re thinking about how to start a business and need the right payment options or looking to improve your current setup, you’ll be equipped to choose the best solution by the end.

What are merchant services? 

When we talk about small business merchant services, we’re referring to all the systems and services that allow you to accept cashless payments. Broadly, this includes the equipment and tools to take payments, the technology to process them, and the accounts to handle them.

To secure these essential tools and services, you can partner with a merchant services provider. You have a few options depending on your specific needs, small business budget, and the types of payments you plan to accept:

• Banks have been the traditional go-to for financial tools and solutions, but can come with higher fees and less flexibility.

• Specialist payment processing providers, who specialise in the tech and tools needed to accept card payments, are typically more flexible than banks but might not offer certain financial services such as business loans.

If you’re looking for merchant services specifically tailored to small business finances, a specialist payment processing provider like SumUp might be your best bet. This gives you access to a range of perks, including flexible pricing and end-to-end packages providing everything from financial accounts to the necessary hardware.

This all-in-one approach ensures that you can accept card payments efficiently by allowing you to pick from a wide variety of services that work together to suit your business needs. Plus, with integrated payments, all your payment processing tools work seamlessly together, simplifying tasks like bookkeeping for small businesses and improving overall efficiency.

Small business merchant services explained

So what falls under merchant services, exactly? Whether you need secure checkout capabilities for your online business ideas or a full suite of tools to manage payments in your mini-chain of coffee shops, here are some of the key tools that can help your enterprise thrive.

Payment processing

Payment processing sits at the heart of merchant services, ensuring that your equipment and systems run smoothly, whether you’re accepting payments online or in person. A robust system will help prevent common issues like debit and credit cards being declined and support various transaction types, including mobile payments and card not present transactions. 

When looking into payment options for small businesses, you’ll come across two main components: the payment gateway and the payment processor.

Payment gateway

The payment gateway is a secure interface between your customer and your business. It encrypts the customer’s card information and sends it to the payment processor, ensuring that all sensitive data is protected.

Modern gateways often used tokenized payments, which replace sensitive card details with a unique code or token. This makes the data useless if intercepted, improving security and reducing the risk of debit and credit card fraud. 

Payment processor

Once the payment gateway has encrypted and sent the card info, the payment processor communicates with the customer’s bank to approve the transaction and transfer the funds to your merchant account.

The processor ensures that transactions are completed smoothly and securely while complying with security standards such as PCI DSS.

Financial accounts

A dedicated business account is an essential for many small businesses. Even if you’re just starting out or working on business ideas from home, it’s worth opening an account so you can separate business and personal finances and manage your incomings and outgoings more easily.

However, to handle electronic payments, your business also needs access to a merchant account. Unlike a regular business account, used for day-to-day operations and small business expenses, a merchant account serves as a temporary pitstop for funds after they leave your customer’s bank and before they reach yours.

With some merchant services providers you don’t need to set up a separate merchant account. Instead, you get all the benefits and functionality through a simple merchant ID, streamlining transactions without opening additional accounts.

Equipment and tools

When it comes to accepting cashless payments from customers, your choice of equipment and infrastructure will depend on how and where you want to take the payments.

In-person payments

For businesses handling face-to-face transactions, various solutions are available, ranging from simple card readers to self-service kiosks. Many businesses use a combination of solutions to speed things up and improve the checkout experience.

Mobile card readers

Card readers are ideal for all kinds of businesses, allowing you to accept payments in a way that’s convenient for you and your customers. They’re affordable, user-friendly, and have varying capabilities to suit your needs. 

Some connect via Bluetooth to a POS app on your phone/tablet, while more advanced models like the SumUp Solo use WiFi/mobile data to operate as standalone devices, which is ideal for mobile businesses like food trucks. You can also opt for card readers with built-in printers, which is perfect if you run a restaurant where staff take payments from customers where they sit. 

Ultimately, whatever kind of business you have, being able to accept card payments quickly will make your business a convenient choice, thereby boosting sales and building customer loyalty. 

Point of sale solutions

While card readers are great for mobility and flexibility, pairing them with a comprehensive point-of-sale system can take your brick-and-mortar business to the next level. POS systems come in all shapes and sizes, from entry-level to advanced solutions, each catering to different business needs.

• Entry-level POS systems – Out-of-the-box solutions like SumUp’s POS Lite include card readers and tablets displaying your products on a touchscreen. This setup often proves ideal for boutiques or cafes needing an efficient way to manage sales and inventory.

• Advanced POS systems – These all-in-one solutions with more features and integrations, acting as a central hub for daily tasks. They’re perfect for businesses with more complex data, accounting and reporting needs, such as restaurants and larger retail stores.

Self-service kiosks

Designed to optimise how hospitality businesses are run, self-service kiosks let customers order and pay without involving staff, speeding up the checkout process by 50%. 

Great for quick-service restaurants, bars, and entertainment venues, kiosks can be customised to fit your branding and products. They provide real-time order updates directly to the kitchen, reducing mistakes and speeding things up.

Kiosks can also boost sales by 25% on average, thanks to suggested add-on products on the menu screen. With fewer staff taking orders, your team can focus on food prep and customer service, making everything run smoother and improving your workplace culture.

Digital payments

Moving beyond in-person transactions, digital payments are essential for businesses that want to expand their reach and provide convenience for their customers.

From sending invoices to offering secure online payment methods, having the right digital solutions is vital for customer acquisition and satisfaction. Here are some of the main methods offered by merchant services providers:

E-commerce

Having a secure and reliable online payment system is vital for any business with an online presence. With this in place, customers can easily purchase products from your website, knowing their financial details are safe.

Payment gateways provide an online equivalent to the processing capabilities built into physical card readers and other point-of-sale solutions. How you integrate a gateway depends on your website setup but is generally straightforward.

For example, SumUp offers tools like a payment gateway plugin and API key to help you take electronic payments on third-party e-commerce platforms like WIX, WooCommerce, and PrestaShop. There’s also a widget for custom websites, making it easy to integrate secure payment processing into any online store.

Invoicing

Sending digital invoices is a great way to get paid quickly and keep track of your transactions. For example, if you run a freelance design business, you can send detailed invoices to clients after completing a project. This not only looks the part, but also makes it easy for clients to pay online, ensuring you get your money promptly.

Using software like SumUp Invoices makes this process even smoother. You can create invoices in seconds with your logo and business details automatically included. If your business is registered for VAT, the software can handle the calculations, helping you stay on top of your taxes. No more worrying about invoice numbers or prices – it’s all done for you.

You’ll get instant notifications when your invoice is viewed, paid, or overdue, and you can set up automatic reminders for late payments. This helps keep your cash flow healthy and reduces the time spent chasing payments.

As well as streamlining your billing process, digital invoices also offer flexibility for your customers. They can pay anytime, anywhere using online card payments, Google Pay, Apple Pay, bank transfers, or cash. The easier you make it for your customers to pay, the faster you’ll get paid.

QR codes

Merchant services can also encompass QR codes which provide yet another convenient and low-effort way for customers to pay you. For instance, let’s imagine you’re hosting a pop-up art gallery. By placing QR codes next to each piece of artwork, visitors can buy instantly by scanning the code with their smartphone. 

In this way, QR codes simplify payments for small businesses and make life easier for your customers, whether you’re running a side hustle or setting up a limited company. 

Phone payments

Taking card payments over the phone is ideal for businesses that deal with orders and bookings, and virtual terminals make it possible to process these transactions by entering the customer’s details into a secure online payment form. 

For example, if you run a flower delivery service, you can securely take payments when customers place their orders over the phone. This method is hugely convenient, allowing customers to pay quickly without visiting your shop.

Payment links

Payment links provide a way to accept online payments in a highly versatile way. You just share the link with your customers, and they can pay securely in seconds. It’s as simple as sending any other link.

You can use payment links across various channels like Instagram, WhatsApp, SMS, and email. This flexibility allows you to reach customers wherever they are, making transactions simple and straightforward.

For example, if you’re exploring how to use social media for small business and decide to host a Facebook sale, you can post your products and share payment links in your bio or direct messages. Customers can click the links and pay securely, without needing to download an app or create an account. 

But payment links aren’t just great for social media; they suit a range of businesses. Whether you’re offering home delivery, running a freelance service, or setting up click-and-collect options, payment links simplify the process. They’re also great for billing and phone orders. Instead of using a virtual terminal, you can simply send a payment link via text or email.

Gift cards

Offering digital gift cards is a great way to boost sales and make your brand more visible. For instance, if you own a cosy little bookshop, you can sell digital gift cards on your website. Customers can buy these as gifts for friends and family, bringing in new customers and generating more revenue for your business.

With SumUp, creating and managing digital gift cards is simple. Customers choose any amount, personalise their cards with various designs, and send them instantly via email. Recipients then present the e-voucher when making a purchase, and you can easily manage the balance within the SumUp app.

You can also offer discounts on gift cards. Just enable a discount in the app, and customers will see the payment amount and gift card value side by side, encouraging them to buy. This initial discount is typically offset later because recipients often spend more than the gift card’s value, leading to extra revenue for you.

How much do merchant services cost?

The cost of merchant services can vary quite a bit depending on the provider and the specific services your business needs. Providers typically structure their fees in a few different ways:

• Per transaction fees – Here, you’ll pay a small fee for each transaction, which is great if you have a lower volume of sales.

• Flat monthly rates – This is a straightforward option where you pay a set fee each month, making it easy to budget.

• Tiered pricing structures – These offer different levels of service at various price points, so you can pick the package that fits your business best.

Additionally, you might encounter costs for hardware and initial setup. For example, investing in card machines or POS systems could be necessary, but many providers have affordable starter options. It’s all about finding the right balance between cost and the features you need to run your business efficiently.

How to choose a merchant services provider

Choosing the right provider (or providers) of merchant services for small business success should be on your checklist for starting a business. 

Whether you look to different companies to provide your business with the ability to take card payments or go for the convenience of a single provider, here are some tips to help you make the best choice.

1. Identify your needs

Start by understanding what your business requires. If you’re exploring how to make money on the side, a simple mobile card reader could be sufficient. Alternatively, if you’re in the food and drink business – perhaps running a busy delicatessen – you might prefer a more comprehensive POS solution.

2. Compare costs

As we discussed earlier, the costs of small business merchant services vary between providers and depend on which services you need. Take time to consider your sales volume and the debit and credit card merchant fees involved when shopping around online for a pricing model that offers the best value for your business.

3. Check for integration

Going with a single provider will simplify your payment infrastructure and reduce the hassle of dealing with multiple systems. To make things simpler still, it’s worth looking out for providers that can integrate with other software services, such as accounting tools for small businesses. 

4. Prioritise security

Card payment security is paramount for warding off cyber attackers and lower your risk of falling foul of chargeback fraud. Make sure the MSP complies with PCI-DSS standards, utilises authentication protocols like 3D secure, and has data protection features like tokenized payments.

5. Consider added benefits

Some service providers offer additional features that can help out with how to run a business efficiently. For example, with a SumUp cash advance, eligible businesses can get quick access to extra working capital – perfect for taking advantage of unexpected business opportunities.