Merchant Services: What is it and How Vendors Help

Owning and operating a pharmacy is no easy task. On top of clinical demands and patient stressors, you must have a good understanding of business operation strategies and regulatory policies.

“I don’t know what Merchant Services is, I just know I need it.”

This is an all-too-common comment we hear, and it’s understandable. Merchant Services is complex—but it’s also frequently explained in corporate jargon, making it even more incomprehensible. Plus, the transparency from merchant services vendors on what you, the pharmacist, is paying for is typically just not there.

So, what is Merchant Services? And what exactly are you, the pharmacist, paying for?

What is Merchant Services?

Merchant services encompasses all components of the financial services related to enabling acceptance of payments including credit cards, debit cards, FSA/HSA cards, and digital payments. In other words, it’s the entire credit card processing system.

You may also hear the term “merchant processing,” which refers to the backend process that happens when a patient pays for a service.

What happens in mere micro-seconds at check-out is a collaborative process amongst a variety of vendors and organizations—from credit card readers to banks to payment gateways. And of course, within the pharmacy industry, there are more regulatory hoops to jump through than a typical brick and mortar store.

How does Merchant Services work?

Let’s say patient Jane Doe enters your store to pick up her prescription. You, the pharmacist, locate her prescription quickly and are ready to ring her up.

- First, the pharmacy needs to utilize a point of sale to manage the check-out process.

• Point of Sale: A software platform, usually integrated with your Pharmacy Management System (PMS), enables the check-out process (scanning, taking payment, signatures, inventory tracking, etc.)
• When the patient is ready to pay, they will utilize the card of their choice. In pharmacies, patients need to be able to pay with FSA and HSA cards, which can limit your choice in merchant services vendor.

- Jane Doe decides to use a credit card. She places her card in/on a payment device.

• Payment Device: The hardware at the counter that the patient inserts, taps, or slides their card through.

Here’s where it can get confusing. Once Jane has tapped her card on the payment device, several things happen, quickly:

• One the card is tapped, the payment device and/or gateway captures the transaction details.
• This request is sent to the payment processor which then forwards it through the card network (e.g. Visa®, Mastercard®, etc.)
• The issuing bank (cardholders bank) validates the card, ensures there are sufficient funds and/or credit and validates any fraudulent or suspicious activity. From here, the issuing bank will approve or decline the transaction.
• That approval or decline goes back through the card network and payment processor to the merchant environment where the transaction is completed.
• Transaction settlement is completed, typically, at the end of the day.

Fund transfers are then initiated within 1-2 days to fund the merchant’s bank account for the funds due.

The good news? The above process is made simple with a credit card processing solution, like our very own, RedSail Pay^TM. They streamline the above process, to provide you vendor consolidation and true peace of mind.

How Much Does Merchant Processing Cost?

With lots of players involved comes a variety of add-on fees. From gateway fees to PCI fees, each credit card swipe can add up. Unfortunately, oftentimes merchant services providers keep the curtain closed, so pharmacies don’t know the markup they’re truly being charged.

In general, there are three types of pricing models:

Flat pricing: A single percentage for all transactions, no matter the credit card type.

Tiered pricing: A grouped approach where credit card transactions are priced differently based on transaction type, card type, number of transactions, etc.

Interchange-plus pricing: A percentage utilizing the interchange fee (fees pharmacies pay to process card transactions) and a minimal markup. The interchange fee is set by the credit card network.

Interchange-plus pricing is by far the most transparent pricing model. How? By separating the card network fees from the merchant service provider/processor fees, you’ll understand how much each credit card transaction costs you. No price inflation due to volume of transactions that you might see in flat or tiered pricing.

Why RedSail Pay^™?

RedSail Technologies^® recently launched RedSail Pay, our own merchant services solution. Not only is RedSail Pay integrated with our PMS systems: PioneerRx^®, NRx^®, and coming soon to BestRx^®, we are also committed to setting a new transparency standard within the industry. What does that mean? No hidden fees, ever.

Launched in April 2025, VP of Product and Payments Presley Kelleher was hyper-focused on building a tool that supports independent pharmacists and their bottom line.

“The ideal merchant services partner is not just a transaction processor, but a partner in business growth. They should offer reliability, transparency, and tools to enhance the patient experiences, all while minimizing costs,” said Kelleher.

With RedSail Pay, you can expect:

• Integration with your PMS
• Predictable, transparent pricing
• Superior customer support
• Quick and painless onboarding process

Bottom line? RedSail Pay is here to enable you and your patients with potential savings. You can schedule your own savings analysis here: https://www.redsailtechnologies.com/redsail-pay

Note: This blog is for general, educational content and does not constitute legal or tax advice.