Bank Merchant Services Compared to Independent Merchant Services

Independent vs Bank Merchant Services

A Competitive Analysis

Often when we meet with various business owners we hear the same question, should I go with my a bank for credit card processing or an independent reseller?  In this article, we’ll look at the pros and cons of going with a bank merchant services or credit union for credit card processing versus an independent merchant service provider.

Clover POS Credit Card Processing Hardware

To begin, one needs to understand what is an independent credit card company or bank merchant services provider.  When looking at the banking industry, the key players are Bank of America, Chase, or Wells Fargo. These are large banking entities typically having staff members for both banking and credit card processing.  Independent credit card companies are companies such as Digital Financial Group, Total Merchant Services, or North American Bancard.

Independent resellers that typically have smaller staff members, but the entities only focus on merchant service products and services.  They may offer other services such as business lending, but their core services are credit card processing.  Unfortunately, Independent merchant service companies get a bad reputation because there are a few of them out there with telemarketing divisions which are relentless in calling business owners.

Next, one also needs to understand how the banking industry operates relative to this industry.  Although every bank merchant services and credit union offers credit card processing, many small to mid-sized banks and credit unions contracts with third-party companies for their merchant services.  These third-party companies, which are typically independent merchant service companies, are better equipped and more educated in the merchant service industry.

The third-party setup can obviously be a problem if a business owner is looking for their branch to answer questions, but all they want to do is refer them to the third-party company.

Customer Service

Customer Service for credit card processing is like insurance.  You just don’t know how well they have your back until something happens. And unfortunately, when it comes to credit card processing it typically involves the company’s receivables, so the support had better have your back when its necessary.  When it comes to banks merchant services and credit unions, customer service can be a big downfall.  Banks typically use an 800 number for support which a lot of times means a call center located in another country.  

Independent credit card companies can be the same way depending on who you go with, but most of them have offices where they employ a small support team located here in the United States.  Others, like Digital Financial Group, assign a representative to the business as a first line support person.  Naturally, when it comes to customer support, having a designated representative that you can get an immediate response from is always going to be the best option.

Bank Branches

When it comes to merchant services, having a branch that is close to your business doesn’t equate to good service.  Unfortunately, branch employees are trained more on deposit accounts versus credit card processing.  Secondly, branch employees are always changing locations, so it becomes challenging to establish a relationship with someone. Building a relationship with someone in this industry can be very crucial in times of issues and problem-solving.

Bank Merchant Services Pricing

Almost everyone in this industry claims to have the lowest pricing. However, in the world of credit card processing the card brands such as Visa, MasterCard, Discover, and American Express set 90% of the pricing a merchant pays in fees.  When it comes to pricing, Independent credit card processing companies are just as competitive if not more competitive than the banks and credit unions.  

The reason for this is because banks must answer to shareholders and they have specific margins they must cover or set each month.  On the other side, independent merchant service companies only have to answer to themselves which means that they can set the lowest pricing they can afford.  And typically, these companies are very aggressive because they know it’s a very competitive marketplace.

Products and Services

The merchant service industry has hundreds of vendors with all types of products and services.  That means that any bank or independent merchant service company can resell or obtain the same product or service.  However, independent merchant service companies typically have an advantage in this area over the banks and credit unions.  The reason for this is because banks and credit unions typically only contract with one source for their ancillary products.  Independent merchant service companies usually contract with multiple vendors to ensure they can fulfill any business needs that come their way.

Funding of Transactions

Next Day Funding is the ability to receive the businesses revenue or credit card sales the very next day after the business has processed them.  In this area of the industry, many banks have the edge over the independent merchant service providers.  Independent providers typically have this as part of their offering.  

However, there is typically a late afternoon cut off time that the business must close out their batch to receive their funds the next day. Bank merchant services and credit union processing have the same system constraints as the independent resellers do. However, banks and credit unions are in a different position.  They can essentially loan the business the funds behind the scenes.  They can float the funds while keeping the business whole each day.  

Obviously, this is a key feature if the business is small and needs its cash flow every day, but typically this isn’t a big benefit as the business grows and can normalize its daily cash flow.

No matter what direction you take, we always recommend going with someone you feel as though you can trust.  Like most other industries, credit card processing has been commoditized to the point of looking simple and easy.  For the most part, it can be simple and easy, however anytime something happens to the businesses receivables, it can be a nightmare.  And in those times where something goes wrong, it’s crucial that the team behind the services be there.

For questions about this topic or any other merchant, service questions feel free to reach out to us.  We provide honest, straightforward, unbiased, representation to save you hours of frustration and headaches.  To learn more about how Digital Financial Group can help you and your business, feel free to reach out to us at or call 623-764-7471.


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