Success in the merchant services industry involves multiple parties working together. Agents and independent sales organizations (ISOs) sell payment processing to merchants. This platform enables a merchant’s customers to use debit or credit cards to make purchases. 

A processor works behind the scenes to facilitate transactions, ensuring that all parties are paid. Making the wrong choice means delays, headaches, and likely churn. Selecting the right one helps you grow a profitable portfolio that should deliver consistent results.

We’ll cover all aspects of choosing a merchant services processor, including:

• Research potential providers (and what to avoid)
• Assess your specific business needs
• Compare pricing structures
• Evaluate customer support
• Ensure security and compliance

Choosing a Merchant Services Processor: Your Complete Guide

Researching Processors

The first step involves due diligence. Considering the importance of your portfolio and career, you don’t want these left in the hands of a bad processor. Proper research means more than skimming their website’s homepage and calling it a day. Dig deeper.

Ask yourself these questions as you look into processors:

• How long have they been around?
• How do other agents feel about them?
• Are they agent-focused?

Look for:

• Upfront and clear pricing
• Extensive reporting capabilities
• Reliable integrations with standard gateways and systems
• Support for in-person and online transactions

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Assessing Your Specific Business Needs

While agents and ISOs perform similar duties, each of their companies has a distinct look. You may specialize in retail clients. Others primarily focus on B2B or ecommerce. It’s helpful when your processor also has experience in what you know.

Questions that help assess your specific business needs include:

• What verticals do you specialize in?
• How fast do you need merchant funding?
• Is a processor structured to scale with your business?

Assessing your specific business needs upfront can save you considerable time and hassle. It also prevents lost revenue. Are you unsure what you need? That’s okay. Just ensure you’re working with a processor that’s flexible enough to grow alongside you.

You should never feel forced into a one-size-fits-all solution when choosing a merchant services provider. Good processors tailor their offerings to fit your merchant mix, whether that means ecommerce APIs, POS terminals, or niche software integrations.

Comparing Pricing Structures

Nearly nothing has a greater impact on your business than pricing models. Unfortunately, some processors bank on you not reading the fine print. Knowing how to compare pricing structures is essential when choosing a merchant services processor.

Let’s look at standard pricing models:

• Tiered: Looks simple. It can hide markups.
• Interchange-Plus: Often preferred for its transparency
• Flat Rate: Easy to explain. Not ideal for high-volume merchants.
• Subscription-Based: Great for monthly recurring revenue

We also recommend finding out a processor’s:

• Revenue share percentages
• Markup thresholds
• Monthly minimums
• Risk-related clawbacks 

Ideal pricing structures should benefit both merchants and agents/ISOs. Even a light difference in fees adds up fast when multiplied by dozens or hundreds of merchants. This information helps you find a processor that’s capable of assessing your company’s specific needs.

Evaluating Customer Support

Having questions or concerns happens. When they do, you hope that a responsive support team is ready to help. In the merchant services world, support isn’t only about helping merchants. It’s also about helping you as an agent or ISO. The quality of customer support from processors can have a significant impact on your merchant retention and your subsequent residual stability.

Does a processor offer 24/7 support? Will you or a merchant speak with someone capable of resolving their concerns? These questions are crucial when selecting a merchant services processor.

Red flags to watch out for in your research include:

• Slow response times (or no response)
• Poor onboarding experience
• Limited ability to resolve issues

Evaluating customer support is crucial if you want to scale without periods of frustration, downtime, and being glued to your phone waiting for a callback or message.

Ensuring Security and Compliance

Every card swipe or online payment is an opportunity to earn residual income—It also carries the potential for vulnerabilities. 

Things to look for include:

• End-to-end encryption
• Utilizes multi-factor authentication for dashboards
• Offers real-time fraud detection

Additionally, the Payment Card Industry Data Security Standard (PCI DSS) is a constantly evolving set of security standards. You want a processor that stays ahead, or at least up-to-date, with such developments, not one that’s playing catch-up.

Feel free to ask a processor of interest how they help merchants stay compliant, which may include offering PCI toolkits, forgiveness programs in the event of a breach, or similar services. Generally, the more safeguards in place, the better.

Ensuring security and compliance isn’t optional. It reduces chargebacks, protects your reputation, and minimizes legal exposure.

Putting It All Together: Your Checklist

Refer to this checklist when choosing a merchant services processor. 

• Are they reputable and agent-focused?
• Do they offer transparent pricing models?
• Can they support your specific vertical or niche?
• Is their customer support available and responsive?
• Do they have measures to ensure security and compliance?

What Happens When You Choose the Wrong Processor?

Let’s take a moment to look at the other side of the coin. What can happen if you pick a subpar processor? The effects are often severe and expensive.

Here’s a closer look at what can go wrong, including:

• Delayed merchant funding
• Slow or unresponsive support teams
• Hidden fees (and angry merchants)
• Outdated security that puts your residuals at risk

Making a mistake when choosing a merchant services processor can have a significant impact on agents, ISOs, and the merchants they serve. Adverse effects can include skyrocketing churn rates, declining residuals, and deteriorating merchant relationships.

Do you need a second opinion on your current processor? Looking to switch to something more aligned with your business model? Velocity Funding works with agents and ISOs, assessing their portfolios. Along the way, we’ve seen everything from fully functional partnerships to disastrous ones.

Wrapping Things Up

Choosing a merchant services processor is a big choice. It’s a critical part of building a sustainable, profitable portfolio. The right processor won’t just help with payments. They’ll help your business thrive. It’s about alignment.

Align with a provider that understands your verticals, supports your growth, helps keep transactions secure, and sets the stage for long-term success as an agent or ISO. Another way to strengthen your portfolio is by receiving a 100% free portfolio valuation from Velocity Funding.

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