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Merchant Credit Card

If you own an online store, you know how important it is to accept credit cards as payment. It will take several more years before society switches to completely cashless payments. But today, according to statistics, more than 70% of buyers prefer to pay with cards. The ability to process them on your site is directly related to an increase in sales, site conversion and money turnover of your store.

Unfortunately, you cannot just go and start working with bank cards on your company’s website. To do this, you need to open a merchant account and conclude an agreement with the processing center. The latter will process card transactions.

If you are new to the e-commerce business, you are probably wondering what a merchant account is. How does it work and what do you need to get it? What benefits will follow after opening an account? Stay tuned as we are about to provide you with the answers you came for.

What is a merchant account?

If you are determined to accept payments in your online store, then a prerequisite is opening a merchant account. A merchant account is an account that receives money after the buyer has paid with a card and the data has been processed by the payment system.

Funds that are debited from user cards go through the processing center and go to your merchant account. Then, you will receive funds to your bank account within 1-2 days.

From the very beginning, it is worth figuring out why the amounts go to the seller’s account, and not your commercial one. Sales are not always going smoothly. Sometimes, buyers may request a refund of their funds because the product did not fit them or the amount was debited from the card as a result of fraudulent transactions. In such cases, the money is withdrawn from your merchant account, and the remaining amount is withdrawn to the bank. That is why opening a merchant account is your first priority if you decide to conquer the world of e-commerce.

Common types of merchant accounts

There are two types of merchant account: merchant and Internet. The only difference is that the former requires a card when paying, while the latter does not. What does it mean? A merchant account is used in conventional stores where POS terminals read payment card information. An Internet account implies online payment and is required for online business owners.

There is another division of accounts, namely high risk and low risk. Opening a merchant account of the first type is more difficult, but possible. The risk level of your activity will be assessed by the bank to which you apply for account registration.

Benefits of using a merchant account

Despite the fact that opening a merchant account is not an easy task, having such an account has a number of significant advantages:

  • Multicurrency. With a merchant account, you can accept payments in various currencies. Thus, expanding the boundaries of your business is a matter of time;
  • Safety. It doesn’t matter if you register an account using a payment system or through a bank yourself, a merchant account is inextricably linked with a PSP certificate. By possessing this document, you guarantee your customers the security of their payment information;
  • Increased income. Every seventh person prefers to pay by card. In addition, large and impulsive purchases are most often paid for by credit cards. By accepting cards on the site, your profit will increase significantly;
  • Attracting clients. Flexibility and freedom of choice are the main requirements put forward by online buyers. By giving them a variety of payment options, you’re winning;
  • Service 24/7. Your business will not depend on banks. Customers will be able to make a payment at any time, whether it is a weekend or overnight;
  • Speed of transactions. It doesn’t matter what turnover your online store has now. The ability to perform over a thousand transactions per minute opens up incredible prospects for increasing your income in the future.

How does a merchant account work?

Online shopping has opened the door for people to a different dimension, where everything happens quickly and conveniently, at the push of a button. More than 2 billion people around the world prefer online shopping and this number is growing at lightning speed every day. Almost every fourth person interacted with a merchant account at least once. From the consumer’s point of view, the procedure for paying for purchases looks simple: you added the product to the cart, selected the method of payment and paid the required amount. How does a merchant account actually work?

  • After the buyer has chosen to pay by card, he/she enters its information: number, validity period, CVC code;
  • The received data is forwarded to the payment gateway, which in turn checks the transaction for fraudulent transactions;
  • Next, the request is sent to the bank, and it informs the payment system (American Express, Visa, MasterCard, and others) about the transaction;
  • The next step is to confirm the sufficient amount in the buyer’s account and the validity of the card. When the issuing bank (the one that issued the card) confirms the data, the system notifies the acquiring bank about it.

The above operations take a few seconds if all processes are fine. Therefore, it is very important to entrust your online store to a reliable payment system that will process card transactions without interruption.

How to open a merchant account?

The starting point for creating a merchant account is to analyze the brands of credit cards. Who would you like to work with? When deciding, don’t ignore local payment instruments as they can increase your traffic. And of course, make sure your customers can use the services of major credit card operators like Mastercard and Visa.

The next step is the preparation of all the necessary documents that relate to your financial situation (average bill, estimated turnover and sales volume). Also, banks ask for tax returns, so get them in order before filing with financial institutions.

Next, you contact the acquiring bank to sign the agreement. Experts advise to open a merchant account in a bank in the country where the business is registered. To facilitate the registration process, do not neglect the institutions where you registered your current account.

When you apply to open an account, here are the factors that will affect the success of the transaction:

  • Failures and achievements. Both ups and downs matter. If your business was on the verge of bankruptcy or was in arrears on bills, chances are you will be denied. Your personal credit history will also be included;
  • Experience. Are you a businessman with years of experience or an enthusiastic newbie? The answer to this question can be a factor influencing the situation when opening a bank account;
  • The type of your organization. Depending on this, the possible risks will be assessed. If your business is not secure enough, the bank has the right to refuse you. It goes without saying that they do not want to be the target of frequent fraudulent attacks.

If the decision is made in your favor, you will receive a merchant account, which is assigned a specific ID in the electronic payment system.

Alternative solution

To avoid the time-consuming procedures associated with opening an account, contact a payment service provider. This solution will save you money and require little or no effort on your part.

The payment solution provider will take full responsibility for the security of the transactions. Also, you will be provided with regular reports on all monetary transactions in your store. Another advantage of using the services of intermediaries is the easy integration of payment methods and currencies.

If you plan to operate not only in the local market but also internationally, the payment method aggregator is a win-win solution. The thing is that transaction processing will be slow if you have an account with a local bank and you accept payment abroad.

Also, payment platform solutions are suitable for those whose business is less than two years on the market or is in a high-risk area. Cooperation with a provider will increase your chances of obtaining a merchant account and protect you from fraudulent attacks.