The number of online transactions that take place per day is on the rise. The increasing number of online entrepreneurs has contributed a lot towards this. If you are an online entrepreneur, you need to have a basic understanding of what it entails to open a merchant account. The different options out there, and most importantly, what to look out for!
What is a merchant account?
Whether you are selling tangible goods such as clothing item or offering a service you definitely need a payment option. Your customers require this to purchase such products or services. Despite there being numerous payment methods out there (such as Skrill, Neteller and EcoPayz), the single most used option of payments is credit and debit card payments. Any serious business is strongly advised to have such an option on their site.
In order to facilitate credit card payment processing on your website, you need to be equipped with a merchant account. What is a merchant account? A merchant account is used to accept payments from a variety of card brands including Visa, MasterCard etc. Any funds received from your customers end up on your merchant account. A merchant account is nothing more than an account where all your funds are held until your payment service provider (or bank) releases these funds into your bank account.
Setting up a merchant account
How does one go about opening a merchant account? The Internet is full of payment service providers. The easiest way to accept credit card payments is to get in touch with a payment service provider or broker who in turn will guide you through the process of obtaining such a merchant account. A payment service provider (also known as PSP and can go by several other names), cooperates with at least one acquiring bank. The payment service provider facilitates the sign up process by providing guidelines and lists of documentation. Furthermore, they provide advise on what needs to be done for your application to be compliant with the bank’s policy. A PSP is also meant to supply the online business with a payment gateway (technical stuff). A very few banks (acquirers) accept applications from online businesses directly. Generally, a payment service provider is always required.
If the right payment service provider is selected, the time frame in which the account is provided is generally shortened. Efficient sales support can surely alleviate the process and make you feel comfortable. In some circumstances, if the wrong payment service provider is selected, the entire sign up process can end up being significantly lengthy and stressful. Therefore, one suggestion is to work with PSPs that bother to respond to your initial queries swiftly. If you can’t get some serious support at early stages, can you imagine the headache half-way through the process?
Then goes the technical part. Once the payment service provider has an indication that your application got accepted, you should be provided with access to their payment gateway. Following comes what techies call “integration”. This is nothing more than connecting your web site with their payment gateway. This is where card transactions are sent to the payment service providers gateway which in turn, routes them to the correct bank.
Location, Location, Location
There are so many payment service providers out there. Where to look and what to look out for? Generally speaking, payment service providers based in Europe (generally) are able to accept businesses from within Europe only. US based banks are only allowed (by regulations) to accept businesses based in the US only and so on. Some providers or brokers, such as Areto Systems Limited, are able to support online businesses from all over the world. They might be collaborating with banks in various countries or have some other way of handling matters. Therefore, it is important to understand that if you are based in the US, it is recommend to seek international brokers or local PSPs.
The mystical high risk
This is an entire different topic to discuss so I’ll simply say this. If you know that your business is considered as a high risk to payment providers, brokers and banks then you can expect higher fees – whether setups, higher rates or even monthly fees. If you are unsure of whether your business is considered as high risk; it is suggested that you get an understanding from your payment provider. At times payment providers might require some documentation before giving a verdict. However try to understand what your business is classified as before pushing forward to a payments provider.
We’ll make sure to cover each topic in a little more depth throughout the coming weeks. In the meantime, if you have any questions or if you have an online business and would like to work with an online payments broker – visit here.