Before starting any online business, owners need a merchant account service provider to be able to accept certain payment methods. Very well, but what is a merchant account exactly? A merchant account is a special type of bank account allowing people to send and receive funds through certain means of payment (bank card, credit card, etc.).
If an e-merchant wishes to offer more means of payment to improve its conversion rate, it is possible to choose several companies in order to have more than one merchant account. It is also possible to go through a simpler solution, enabling several payment methods to be activated simultaneously at different purchasers, all thanks to a single contract. Merchant accounts are distinguished by the means used to gather and collect information from the payment card. This happens either from the card being swiped through a reader or in the presence of the card holder (with a terminal POS or in shops with a portable wireless terminal) or with purchases by mail or telephone or via the internet.
Internet merchant accounts deal with merchants selling products or services via their website and, thus, collecting payments online and in real time, all while using an automated system or payment gateway. It is the banks and payment service providers that offer these Internet merchant accounts. Due to the slowness of the banks, many e-shops choose to go through a payment service provider.
Indeed, the process of requesting an Internet merchant account is easier and also faster than other options: it takes about 48 hours to grant or decline a merchant’s account, whereas it takes longer for a bank, which conducts a solvency investigation before granting or denying an internet merchant account. However, do not be fooled, payment agencies and banks are working together.
Things to Consider When Searching for a Merchant Account Service Provider
The use of bank or credit cards is becoming the preferred way of paying for all kinds of shopping activities, not only in the developed world but also in emerging markets. Two key factors are contributing to this trend:
- Comfort and security: Credit cards mean that cash money does not have to be carried in large quantities for high-quality purchases. Credit cards also perform the convenience of shopping and remote instant payment.
- E-commerce: With the increasing spread of electronic shopping options such as online, TV and telephone and growing acceptance of the convenience factor, credit cards are becoming the only viable solution for payment.
Merchant accounts are accounts that allow acceptance of payments through credit cards and debit cards. A merchant can obtain a merchant account at a bank or through an independent merchant account service provider who specializes in providing merchant accounts for different business types. There are different types of merchant accounts available depending on the needs and nature of each business.
However, most merchant accounts can be classified as “swipe” based. These merchant accounts are dependent on a physical terminal connected to a telephone line. The credit card must be swiped through this terminal to initiate, process, and complete a payment. In the case of checking accounts, the vendor will use a check reader as the terminal.
Understanding “swipe” and “non-swipe” Innovations
A new innovation in the swipe-based processing segment is the wireless credit card charging terminal, where instead of a regular telephone line, the transaction is made with wireless phone technology. The advantage of this technology is that a merchant or e-retailer is not geographically limited when accepting payments. For example, at a retail store, a merchant can easily set up a terminal without wires, a payment system for walk-by clients to submit credit card payments.
The non-swipe options include all those payment methods that require credit card information, but the credit card itself does not need to be swiped. This also includes merchant accounts for online check payments. Some of the most common non-swipe merchant accounts include Internet merchant accounts, e-checks, and phone systems.
An Internet merchant account is an account made through Internet-based traders. Credit card payments are made upon receipt of the electronic credit card information via a web-based form and transmitted through a payment gateway of the receipt processed. This type of merchant account is a very popular merchant account, mainly because of the considerable growth of the e-commerce industry.
Online “e-Checks” use check payments without actually receiving a check by mail or in person. The customer can check information on the physical check, such as deposit name, account name, check, and so on, and the merchant can use a check processing solution to check and receive a check through their online template or phone/fax or e-mail. The use of the special software can then print the check remotely and the retailer can then deposit it in its physical form.
Phone-based credit card systems use a dial-tone, as this type of account information is received via a phone. This account is suitable for phone ordering companies that have a substantial business through the phone. An important factor to remember with merchant accounts is the fees.