Merchant accounts: behind the scenes
Setting up a merchant account is above all about business possibilities. If you’re serious about your ventures, you can’t run an online shop nor accept card payments on your website without having it. Don’t cut corners, do it right!
What in Lord’s name is
a merchant account?
It’s a separate bank account or rather a line of credit to a merchant that allows business to accept online payments, meaning money from online transactions. This account is established under an agreement between a merchant and an acquiring bank for settlement of all transactions processed on your website.
Merchant accounts typically don’t hold funds for an extensive period of time. You can’t withdraw money from ATM or make a transfer as in your regular bank account. It usually transfers payments to another business or private bank account on a daily, weekly or monthly basis. Interested?
How it works
It looks easy and it should. The customer completes order on the merchant’s web store. Shopping cart program on the site gathers the order information, compiles, encrypts and finally transmits this data to a credit card processor (PSP). The Payment Gateway checks and sends a request to the acquirer. The bank turns to customer’s credit card issuer for the card to be charged. Issuer validates the card and the account. The information whether the requested amount can or can’t be transferred goes back to the PSP and then to the shopping cart, which can tell the customer as well as the merchant whether this transaction can be completed or not. The customer’s bank transfers funds from the cardholder’s account to the merchant account. Meanwhile, the acquirer deducts his fees and deposits the balance on the merchant account. A piece of electronic cake.
Merchant account anyone?
Who can you turn to with your desire to open a merchant account? The first and most reasonable answer you’ll come up with is to an acquiring bank. They provide a secure and reliable option. Yes, that’s true. Yet, for probably good reasons, the banks are mostly good in being big and wealthy. Counting someone else’s money, transferring data and watching your chargeback ratio is what they do best. Beware start-ups! It can be a real nightmare to obtain a merchant account directly from the bank.
So now what? Check Payment Service Providers (PSP), which are partners to acquiring banks and can find a suitable solution for a merchant account on behalf of such businesses. They are made for processing online payments, eager to evolve and change. You won’t get any ticket to break through the support system here. They’re keen on knowing you and your business better. They want you to succeed. Globally.
Hard knock merchant life
Don’t be surprised when it comes to the verification process while setting up a merchant account. Yep, verifying is a crème de la crème for acquirers. Application forms, Certificate of Incorporation, passport copies, utility bill, Articles of Memorandum of Association along with a question about your webhosting provider, current turnovers, transaction values, processing history and photos from the last summer holidays. It’s all about safety measures, what did you expect?
Nothing comes for free
A merchant account has a variety of fees. Some are periodic, others charged on per item or percentage basis. The most common are:
- annual or monthly fee – charged for the costs of maintaining the merchant’s account,
- authorization + transaction fee – charged each time a transaction is sent to the card issuing bank to be authorized and applies no matter the result of the authorization,
- commission – involving interchange and cross border fee,
- chargeback fee – charged by the providers for service know as a “retrieval request”, generated by card holder complaint, sales error or fraud,
- swift fee – for transferring founds from merchant account to merchant’s other desirable business or private bank account,
- set up fee – well, someone has to do it!
It’s all about the money, so show them what you got. Your type of business, monthly turnover, any financial history – it all may save you a few cents.
Happy ending
Once you have been approved, you will receive notification and instructions on how to successfully implement your new merchant account and how to integrate it with your current business workings. Isn’t that great? Now you are well equipped to conquer the world.
So, how serious are you about your ventures?
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