Can You Have a Point-of-sale System and Merchant Services from Different Companies?

December 6, 2021

You’ve probably never considered having your point-of-sale system and merchant services from different companies. It sounds like an exciting idea. But are there any drawbacks to doing so? Suppose you have two competing entities providing these services for your business. What would happen if they had some disagreement or issue with one another? What happens when you need more than just one service provider to get everything that needs to be done for your company? 

Many questions come up when considering this topic. The benefits may outweigh the risks, but before deciding whether to pursue this course of action, it is essential to think through all aspects thoroughly. This article will explain the benefits of having a point-of-sale system and merchant services and some drawbacks if you choose to pursue this idea. 

Difference of POS System and Merchant Services

A point-of-sale (POS) system is the software and hardware that a business will use to process credit card transactions or any other types of electronic payments such as debit cards or NFC (Near field communication). 

The aim of having a POS system for your business is to replace manual accounting and sales recording. Typically, you would keep all sales and inventory in a notebook or paper. Still, you can do this much more quickly and easily with an electronic point-of-sale system. You can also easily save all data and transfer it into whatever type of spreadsheet program you prefer to use when doing taxes at the end of the year. There are even programs that allow you to manage expenditures and accounts payable, in addition to sales. 

You can also use a point-of-sale system for other things such as inventory management. For example, suppose you have multiple locations. In that case, it could be beneficial to know what items are selling well at which site to order more from one place and less from another. Some systems allow you to manage digital signage in addition to everything else that comes with a POS program. 

The credit card company itself usually provides merchant services. Still, a third party specializing in merchant services can also offer merchant services. They are called payment processors or PSPs (payment service providers). 

You will typically pay fees for each electronic transaction processed with standard merchant services through your account. The fees charged depend on the type of industry you operate in and the number of transactions you process throughout the month.  

Other ways to charge merchants for accepting credit cards include: 

  • Charging an extra percentage on top of every transaction. 
  • Adding a certain amount per transaction. 
  • Even charging a monthly flat fee no matter how many sales are processed. 

Why Should I Get Merchant Services From the Same Company as my POS System?

Having a point-of-sale system and merchant services from the same company can be convenient. You do not have to sign with two different companies to get everything you need for your business. They will most likely offer better overall rates than two separate entities for these services. 

There are many benefits to having both POS and merchant accounts from one or more companies: 

  • You only have one contract: this is by far the most significant benefit to getting these services from the same entity because it means that all fees will be on your monthly bill as opposed to dealing with multiple invoices coming in every month, which may include separate contract termination fees as well as early cancellation penalties. It also reduces the chance of human error and the possibility of forgetting to cancel one service before starting another. The process can also be done entirely online, which means you will not need to send in any documentation or other materials for it all to go through. 
  • You get better rates: when dealing with merchant services companies specializing in these types of transactions, they typically have more experience than a credit card company with only individual merchant accounts. They will also spend more time working with you to find the best possible rates for your business, which means you may be able to get lower fees and better overall rates when it comes to what you pay for processing each transaction. 
  • You get one point of contact: most POS providers already have relationships established with many different PSPs (payment service providers). This means instead of having someone else call on your behalf, try to do all of the negotiating and work to get everything set up, there will only be one person contacting the PSPs (and possibly other companies such as gateway providers) on your behalf. You can focus on running your business without worrying about calling and negotiating with credit card companies and their respective merchant services providers. 

There are some cases where it is okay to have separate point-of-sale systems and merchant account providers. Still, it is not recommended in most situations since having both from the same entity can save you time and money overall. 

Why Might You Need Two Different Companies for These Services?

There is little to no communication between the two entities when you get the point-of-sale system and merchant services from different companies. This means the rates they have negotiated for your business may be vastly different from one another, meaning that what you are paying per transaction will vary greatly depending on which company processed each sale or refund. 

Depending on the type of business you run, you may need to use two different entities for your POS system and credit card processing. For example, suppose you run a restaurant that takes in vast amounts of cash every day. In that case, having one company will most likely not suffice because they probably do not have merchant accounts set up with PSPs (payment service providers). The latter work with high-risk merchants such as restaurants. 

Another instance where you might need two different companies is if you require certain functionality which your POS does not offer but is offered by another provider. If this is the case, there is no point in signing everything with one company since they would operate entirely independently of each other. You can also end up paying more money for the point-of-sale system if you sign up with two different companies since they will be competing against each other to get your business; this means that you may end up paying higher prices for the program. 

How to Choose Between Two Different Companies?

Choosing between a virtual terminal company and a PSP with direct integration is not easy, especially when presented with all the benefits of each. 

First, you need to figure out what kind of business you run since this will determine if either option would be feasible for your needs. For example, does your store or restaurant take in a lot of cash daily? If so, a virtual terminal company will probably not be the best fit because PSPs (payment service providers) that work with high-risk credit card companies such as restaurants will most likely not allow you to use a virtual terminal. 

In cases where you need more advanced POS functionality and do not have a brick-and-mortar store, you should consider a PSP with direct integration and offers these services. This means not only will they take care of processing credit card payments but also allow you to process checks, invoices, and other types of transactions for your business. 

There are quite a few things to consider when choosing between virtual terminals and companies with direct integration. Still, the main point of deciding which company to go with is to find out what kind of transactions you will be processing. 

How Does Having Separate Merchant Accounts and POS Providers Work?

There are typically two ways to set up merchant accounts with different PSPs (payment service providers) and POS providers, either virtual terminal services or direct integration. 

Virtual Terminal Services – this is a service your POS provider will offer that allows you to run credit card transactions through an online system where the customer enters their payment information on your website rather than swiping the card at your store. It generally costs between 3-5% of each transaction amount, which is significantly lower than using most gateway companies directly. 

This option may be suitable for businesses with no physical locations but still want to accept credit cards, even if it is only online. However, since all sales are made online, you will receive significantly fewer additional benefits for discounts or other special deals offered by the PSPs. 

Direct integration – this is a process where your POS provider has an agreement in place with one or more credit card companies and their PSPs (payment service providers), which allows them to offer their services directly through your software system. 

You and potential clients of your business need to know how these types of transactions work because depending on who you are using for merchant services and point-of-sale, they can vary significantly in terms of pricing and overall expense. For example, if you choose a virtual terminal company that does not work with many PSPs, you could pay between 4-5% of each transaction, which is the same as working with most gateway companies. However, if you used a PSP specializing in virtual terminal services and directly integrated with your POS provider, you would only pay 2-3% for every transaction. 

Benefits and Drawbacks

Many businesses find it easier to have one company handle their POS system and merchant services needs. This is because the company has an in-depth knowledge of both systems, so they can provide you with all of your needs without wasting time switching back and forth between service providers. 

When considering having POS software and merchant services from the same vendor, some benefits exist when comparing this to using separate entities. Still, it is also not always a risk-free proposition either. 

Benefits of using one entity for your point-of-sale system and merchant services: 

  1. Fixed Resource Pricing
  2. Reduced Implementation Time and Costs
  3. Reduced Customer Service & Support Costs
  4. Simplified Recurring Billing and Collections Processes for Merchants, Retailers, and Customers
  5. Proven Technology Integration and Software Development Experience in Custom POS-to-PSP Programs

Some of the risks associated with using different entities for both POS system and merchant services needs:  

When looking for a point-of-sale system and merchant services from different companies, some benefits exist when comparing this to using separate entities. Still, it is also not always a risk-free proposition either. 

  1. You may have an outdated system
  2. It might bechallengingto integrate the two systems 
  3. The customer experience could suffer as a consequence
  4. Theft and lost opportunities for cash backup
  5. Not having these services from the same vendor can lead to missed or inaccurate reporting

Questions to Ask Before Signing up for either Company or Service

When looking for a point-of-sale system and merchant services from different companies, you should always ask yourself: What type of transactions does my business process? Do we need to take in a large amount of cash daily or run other types of high-risk credit card processing? Do I need advanced functionality such as check processing, invoicing, and different kinds of transactions? This company allows me to use the virtual terminal(s) with PSPs (payment service providers)? Is direct integration required to provide the best processing fees/rates? 

These questions can help you decide which provider is better for your unique needs. If you are having trouble deciding between the two options, make sure to conduct extensive research by reading reviews, checking out different companies online, and learning more about your options. 

Conclusion

You may or may not benefit from having a single company handle your POS system and merchant services needs, as there are trade-offs to consider before making this decision. Do some online research on different companies before signing up, read reviews before committing to any single vendor, and compare rates offered by small businesses and larger entities to benefit from the most competitive processing rates possible. 

BNG Point-of-Sale offers POS solutions that improve your bottom line. With a full selection of POS systems for various businesses, you’ll find the right tool to grow your business with the personalized support you need. Connect with us to learn more.