Setting up a merchant account is a crucial step for any e-commerce business looking to accept card payments. A merchant account facilitates secure payment processing, improves customer satisfaction, and enables smooth transactions. Here’s what you need to know before diving in to set up a merchant account.
Start here: Set up merchant account with eFlow Processing
1. Understand what a merchant account Is
A merchant account acts as a temporary holding space for funds from customer transactions. Once a payment is authorized, the funds are placed in this account before being transferred to your primary business account. This intermediary role ensures secure payment processing and protects both merchants and customers. Without a merchant account, accepting credit or debit card payments online is not possible.
2. Choose the right provider
The provider you select significantly impacts the success of your payment processing. There are three main types of providers to consider:
- Traditional banks: These institutions, like BNP Paribas, often offer merchant accounts as part of a suite of financial services.
- Payment processors: Companies like Worldpay or Stripe specialize in handling payments and may provide streamlined services tailored to e-commerce.
- Independent Sales Organizations (ISOs): These entities, such as eFlow, often cater to businesses with specific needs or those considered high risk.
When choosing a provider, consider your business type, transaction volume, and any industry-specific requirements. Each provider has unique features, pricing structures, and risk tolerances, so thorough research is essential.
3. Prepare for the Application Process
Setting up a merchant account requires submitting a detailed application. Providers typically evaluate businesses based on several criteria:
- Business type: Companies in high-risk industries, such as subscription billing, may face additional scrutiny or higher fees.
- Processing history: Your history with chargebacks and fraud plays a role in determining your eligibility and terms.
- Projected sales volume: Providers need to understand your expected monthly sales volume to assess their risks and profitability.
To streamline the process, gather relevant documents, including financial statements, business licenses, and details about your website and operations.
4. Integration with payment gateways
A payment gateway links your e-commerce website’s checkout system to the merchant account. It securely transmits card data and transaction details to the acquiring bank for processing. The integration process may take a few days to a couple of weeks, depending on the features required.
Once the integration is complete, you’ll receive merchant identification numbers (MIDs) to finalize the setup. Your payment gateway will use these credentials to securely manage transactions.
5. Know how transactions are processed
The transaction process involves several steps:
- A customer initiates a payment on your website.
- The payment gateway sends the transaction request to the acquiring bank.
- The acquiring bank forwards the details to the issuing bank (the customer’s card provider).
- The issuing bank approves or declines the transaction.
- Approved funds are held in the merchant account before being transferred to your business account.
This process usually takes a few days, although some providers offer expedited settlement options for an additional fee. Be aware that funds in the merchant account are not immediately accessible, as this delay helps mitigate fraud risks.
6. Fees and settlement times
Merchant account providers charge fees for their services. These may include setup fees, transaction fees, and charges for additional services like same-day settlement. Before committing to a provider, ensure you fully understand the fee structure and how it aligns with your business needs.
Conclusion
To successfully set up a merchant account for your e-commerce business, you need to choose the right provider, prepare for the application process, and understand the technical and financial aspects of payment processing. By doing so, you’ll ensure smooth operations, enhance customer satisfaction, and position your business for growth in the competitive online marketplace.