Being an entrepreneur means continuously tackling the different risks that comes with the territory of a business. This is especially true if you have an online business where the risks are higher due to the nature of processing transactions.
You also need to consider a few other things like the speed and efficiency of processing online payments to ensure that your customers don’t abandon their carts and move to another online store.
This is why you need a good merchant account to accept and process electronic payment card transactions on your behalf. Having a good merchant account relationship is essential for your online business, so it’s very important to choose the right partners in this area.
What is a merchant account?
A merchant account is essentially a business bank account where electronic payment card transactions are processed. To get a merchant account, you will need to work with a merchant acquiring bank that will manage all communications within an electronic payment transaction.
If you own a brick-and-mortar store, you could choose to open a merchant account to be able to accept debit or credit card payments, but you are not required to do so because you can choose to accept cash payments.
If you own an online shop, however, a merchant account is part of your requirement since you can only do online transactions.
Who is the merchant in online payment?
In a merchant account, the business owner is considered the merchant who will get into an agreement with a merchant acquiring bank, payment processor, independent sales organization or in some cases, a member service provider to be able to accept debit or credit card payments.
Whatever partner you choose as the merchant, you will be bound by the same operating regulations of different card associations which you will process payments from.
How does an online payment processed?
Once a customer is done shopping and proceeds to check out, communication is then sent to the merchant acquiring bank that also contacts the card processor, which then contacts the card issuer.
The latter will then authenticate the payment transaction based on available funds and other security checks. Once the transaction is authenticated, the merchant bank then authorizes the transaction and settles the funds on the merchant’s account.
This process occurs within just a matter of minutes and the merchant acquiring bank will deduct some fees directly from the merchant account as a payment for processing the transaction.
Processing fees can range from 0.5% to 5.0% of the total transaction amount plus an additional $0.20 to $0.30 for every transaction.
In a time when consumers want everything fast and easy, having a merchant account is definitely a good step towards giving your business a leg up against the competition.
Whether you’re a traditional brick-and-mortar store or you do business purely online, your merchant account will help you increase sales and build more trust with your customers.
So if you don’t have one, apply for a merchant account now.