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Historically banks have played a major role in credit card processing. It is not tough to speculate the reason. Banks are where merchants have had accounts usually for years and it was relatively simple to sell credit card processing to existing account holders. Even point of sale terminals could be effortlessly linked with merchant accounts and the bank could get a percentage for moving that money thus setting up an additional revenue stream for themselves .

Banks have traditionally been the leading credit card processors. Speculating the reason for this is not difficult. Banks are where merchants have had accounts usually for years and it was relatively simple to sell credit card processing to existing account holders. Their merchant accounts could be effortlessly linked with point of sale machines and the bank kept a small percentage of the money moved, thus developing a new source of revenue for themselves .

Of late however, banks have been losing their preeminence to third party credit card processing companies. This is not accidental. Attractive pricing backed by solid technology has helped the third party credit card processing companies make sizeable inroads into the industry.

Banks thought for a long time that since the merchant account was serviced by them, were entitled to sell every other service connected with merchant funds. They did not understand that the customer is always hunting for the best deal and they abandon you if your competition is offering better rates and service.

Consumers do not necessarily desire a one-stop shop for their financial requirements. What they do prefer is that their needs be met in the most efficient and inexpensive manner. It does not really matter if they have to source from multiple vendors so far the rate and service is outstanding. This is where the banks were edged out by third party processors. Their mantra was simple but powerful - come to us for a better offering at a lower price, and it worked!

Internet was instrumental in facilitating the rise of 3rd party processors. It altered all norms of the business world. Thanks to economical and quality connectivity provided by internet, third party credit card processing companies are able to process credit cards correctly and inexpensively . They are able to offer their services to merchants of any size. Earlier, such service offered only by large banks, now numerous technically savvy outfits which provide if not more but equal value have come up to service the merchants.

Of course, having all services provided at a single point is a good convenience. It saves a lot of time and effort otherwise spent in integration. But it is essential to carefully consider the costs too. Businesses would be keen on furthering their relationship with the bank especially if they have had their accounts with them for years. But they would want to get a good deal as well. It is important to accentuate the other key service areas as well in addition to rates and charges: internet processing, no signature processing etc.

The third party credit card processing companies are playing a vital role. They assist businesses do better when they negotiate with their bankers. Banks cannot take this threat lightly anymore due to the vigorous competition and are adjusting their modus operandi to challenge the new competitors. Eventual beneficiary is the consumer - the small business owner, irrespective of who they choose to partner with, they are assured the very best deal.

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