Setting up an online store has never been easy these days. There are various platforms out there that allow for the easy set up of the store.
For now, we’ll talk about one vital part of various ecommerce platforms. This is the merchant account.
What is a Merchant Account?
A merchant account is a very important part of an online store. It is a type of bank account that allows for payments via credit or debit cards.Thus, the merchant account is actually an agreement between the seller and a bank or payment processor.
When a customer visits your store and purchases a product, if you have a merchant account, the funds are first transferred from a credit or debit card to that account. Afterwards, it is then transferred to the business bank account within a day or a week depending on the agreement.
In today’s day and age, a merchant account is becoming increasingly vital to operating an online store. This is mostly because people can easily pay with the various cards they have.
How do I Get a Merchant Account?
The process for getting a merchant account is very competitive. It is based on several criteria that vendors look at when people apply for one. These include:
- The type of business – Depending on the type of business that you have, the susceptibility for fraud varies greatly. If your business is one where credit card fraud may take place, it may not push through.
- How long the business has been operating – If you are a new business, this shows vendors that you lack the experience and traction of business.
- The history of your business – Vendors will also look at the history of your business. If you have had a history of fraud or bankruptcies, chances are they may not allow for the merchant account to proceed.
- Previous Merchant Accounts – If the vendor sees that you have previous merchant accounts and that you handled it well, this may boost your chances of securing a new one.
- Credit History – Finally comes credit history. Like with any bank decision, credit plays an important role. Good credit is a sign that vendors can trust you. Bad credit may mean otherwise.
Increase your chances of securing a merchant account by ticking off the criteria above. Apart from that, you may want to opt for a merchant account in the same bank that holds your personal or business bank account.
It must be noted though that if you don’t meet certain criteria, it does not mean that your application for a merchant account will be rejected. Certain vendors may just demand higher fees in order to counterbalance the risk.
If the business succeeds at a later date, these fees may be renegotiated.
Take note though that there may be other fees associated with applying for a merchant account. These include fees for the application process, setting up, a monthly fee, a fee for discounts, a fee per transaction, a fee for when a payment is issued from a bank not from the same country, and even a rental fee.
Internet Merchant Accounts
Merchant accounts for the internet – and thus for online stores – is a separate thing altogether. The process may be the same and it usually does the same thing. However, there are some differences that must be noted.
An internet merchant account is designed to hold the payment from credit or debit cards. The big difference though are the fees.
Online transactions you see have a bigger chance of risk. This is because the non face-to-face nature of payments contributes highly to this risk. When a person makes a purchase face-to-face, the chance of risk is lessened.
If you are going for an internet merchant account, take note that you will need a payment gateway. This is a very important part.
The payment gateway makes sure that the information from the credit card is valid and correct. It is the conduit that sends the information to the bank for checking and authorization.
Depending on the platform that you are using though, it may already have a payment gateway available. Be sure to check if your platform already has one.
It is possible to apply for an internet merchant account via the bank you are with. However, there are also other providers that you can turn to. You can check out providers such as Moneris, InternetSecure, and Beanstream.
Now there is another alternative that we need to talk about. You can often find online payment gateways right now. These services make it so you don’t need a merchant account anymore.
Take PayPal for instance. You can use PayPal services to circumvent the necessity for an internet merchant account. If a business wants to start the payment process quickly, PayPal is a viable option.
Why are Merchant Accounts Important?
There are many reasons that dictate why merchant accounts are now becoming more important to operating online stores.
First of all, it provides more options to the customers. If you have a variety of payment options that cater to various customers, this ensures that the number of people who buy increases as well. This is an increase to the volume of online sales.
Another benefit of having an internet merchant account is that it opens up your business to the whole world. With an internet merchant account, you take your first step to introducing your business internationally.
People from all around the world can now purchase your products via their cards. This also increases your client base exponentially.